FHA 203K Loan in Utah
The FHA 203K Loan is a renovation loan guaranteed by the FHA. It allows the borrower to roll their renovation expenses along with their regular mortgage into one mortgage. It can be used to purchase a home that needs renovation or to refinance and finance new renovations as well. There are two types of FHA 203K Loans, one is the FHA 203K Standard and the other is the FHA 203K Streamline (Limited). The Streamline is meant to be an easier process for smaller projects as compared to the FHA 203K Standard Loan.
How Are the Two FHA 203K Loans Similar?
Both FHA 203K Loans require that the home be owner occupied. For both loans, the loan to value ratio guideline is 96.5% for purchase and 97.75% for refinance. The contingency reserve requirements are the same as well. They require a minimum of 10% regularly, 15% when utilities are off and cannot be tested, and it may increase to 20% at the discretion of the DE Underwriter.
What Are the Differences Between the loans?
One of the differences is that the FHA 203K Standard requires a work write-up from a HUD constultant, but the Streamline doesn't have any inspection requirements. The Standard requires a minimum of $5,000 in improvement repairs and the Streamline doesn't have a minimum. The FHA 203K Standard has no maximum, as long as the total amount needed for repairs plus the purchase price or pay off of existing mortgage does not exceed 110% of the subject to appraised value or FHA Mortgage Limits per County, whichever is less. The FHA 203K Streamline sets a lower maximum, requiring that the total rehabilitation costs not exceed $35,000. These costs include all hard costs, the contingency reserve, inspection fees, title updates, permits, and the supplemental origination fee.
The Standard allows escrowed mortgage payments for up to six months, but these are not allowed under the Streamline loan. The FHA 203K Standard Loan allows 1 contractor (must be a general contractor), but the FHA 203K Streamline Loan allows for up to 3 contractors. The Standard allows for anywhere from 1 to 5 draws and the Streamline allows 2 draws per contractor. The number of draws for the FHA 203K Standard Loan is determined by the HUD constultant. There are no disbursements made at closing. Materials draws are not allowed for either type of FHA 203K Loan.
What Repairs Are Allowed?
The FHA 203K Streamline Loan allows for any repairs that are necessary to bring the property to the FHA's Minimum Property Standards. These repairs can include the repair or replacement of the roof, gutters, dowspouts, HVAC, plumbing, electrical, flooring, minor remodeling, painting, weatherization, appliances, exterior decks, patios, porches, basement finishing and/or remodeling, windows, doors, well, and septic. The FHA 203K Standard Loan allows for any structural improvements, health and safety related items, repairs to existing swimming pool, major landscaping, and anything that the FHA 203K Streamline allows. Any self-help or luxury items are not approved under either loan.
At The Tim Hawkes Team we offer both kinds of FHA 203K Loans and would love to answer any questions that you might have about them. Whether you think the FHA 203K Loan is right for you or even if you are just looking into it, give us a call and we would love to talk with you about it!