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When Can I Use A Streamline FHA 203K Loan?

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by Eva Martinez
(Fort Worth, Texas, USA)

The streamline FHA 203K loan may well be the most useful mortgage product on the market today. This loan has several potential purposes, but one stands out above the rest – using the streamline FHA203K loan to purchase a foreclosed home.

There are arguably more foreclosed homes for sale today than at any point in history. This presents an awesome opportunity for anyone hoping to become a homeowner.

Homes can be bought today at discounts that would hardly have been believed possible just a few short years ago. However, many of the foreclosed homes for sale have problems which are difficult for the average first or even second time homeowner of today to solve.

Before a home is foreclosed on, the owners generally go through a long period of financial difficulty. They weren’t able to make their house payments. That’s why they ended up losing their homes. It goes a little further than that, though. These owners usually also had no money available to maintain and repair the home.

In addition, the banks that foreclosed on the homes have no desire to become property repair and management companies, so they tend to offer discounts on the homes rather than pay for repairs. This is true even for “HUD homes”, those homes now owned by the government because they were originally purchased with loans the government guaranteed to pay the lender for if the borrower didn’t.

The net result of this series of decisions is that most of the foreclosed homes on the market today need some degree of repair done to them. Luckily, these repairs are very often only cosmetic in nature rather than being structural problems with the home.

Here is where the streamline FHA 203K program saves the day. The typical borrower that uses a standard FHA insured loan to purchase a home has decent credit but not perfect credit and most importantly, does not have a substantial amount of money to pay down when they purchase the home.

Lenders allow this as long as they are able to get FHA to guarantee that the loan will be paid off if the borrower fails to pay. With a standard FHA loan, the property must be in good repair or In other words, in “move in” condition.

A streamline FHA 203K loan has all the same financial requirements as the standard FHA insured loan, including the lower required down payment, but it does not require that the home be in “move-in” condition. A streamline FHA 203K loan allows you to pay for some non-structural repairs on the home at a cost of up to $35,000.

Non-structural repairs can include items such as roof replacement or repair, gutter replacement or repair, replacing flooring, remodeling kitchens, replacing decks, finishing basements, replacing windows, replacing septic systems and other items which don’t involve major structural work on the home.

In other words, the streamline FHA 203K loan is perfect for dealing with the most common problems experienced when purchasing aforeclosed home. If you are in the market to buy a home, you should definitely look into getting qualified for this program.

Updated: October 18, 2013 — 5:49 am

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