Streamline 203k Fact Sheet
An FHA Streamline 203k loan allows a total cost of $35,000 to be added to the sales price. This does not mean $35,000 in repairs/upgrades. This is the first thing that all parties – Loan Officers, Buyers, Realtors, Contractors, and others need to understand.
This is probably the biggest misconception out there regarding the program. Since most homebuyers already have unreasonable expectations regarding how much work they will get done within their budget, it really doesn’t help if they get surprised by the information they don’t have a full $35,000 to work with either.
I know that the guidelines and many people representing expertise on this product state that 110% of the after completed value can be financed, this is not accurate. If anyone argues this point tell them to use the worksheet 92700 that HUD requires on these and try to come up with any scenario where they will ever actually arrive at a base loan amount greater than 106.15% of the after completed value. This will save them from making this discovery when they try to actually do their first one.
Basics:
| Approximately $28,500 – $32,000 in upgrades and repairs can be done in most cases |
| It is not limited to just the energy package. It will allow other repairs and upgrades within certain limitations – no structural changes. |
| Up to 106.15% of the after completed value may be financed. (Use Worksheet 92700) |
| An EEM can be stacked on top of a Streamline 203k or a Full 203K |
| The bid for repairs and upgrades is considered in the appraisal valuation process |
| Allows for 50% of the bid to be released at close of escrow, (Some lenders may not allow this); balance of bid is released after work is completed. (Expect a processing time of around 30 days after completion before 2nd payment is released. This may vary by lender.) |
| No work order changes. Work on bid must be work completed. (With some limited exceptions.) |
| For most applications the Streamline 203K product is going to be more than adequate. Depending on the lender you can typically include approximately $28,500 to $32,000 in upgrades and repairs. | I know that the guidelines and many people who do not really understand the program say $35,000. This limit must include inspection fees, permits, contingency reserve, etc, so it is impossible to ever finance $35,000 in upgrades. This amount is also added before the down payment is calculated so 3.5% must be paid by the buyer. |
| This program is not limited to just an energy package. It will allow other repairs and upgrades within certain limitations. The primary one being no structural changes. | This can be a great option for roof replacement, pest repairs, Appraisal Compliance issues, and more. You CANNOT do Solar (PV) with a Streamline 203K. It is only allowed on a Full 203K. |
| Up to 106.15% of the after completed value may be financed. | Some of the guidelines and most of the people representing expertise on this product say 110%, this is also not accurate. |
| An EEM can be stacked on top of a Streamline 203K. This will allow an additional 5% of the property value to be included for qualifying energy related upgrades. When an EEM is stacked on top of a Streamline 203K it will result in a total after completed value of 111.15%. | My comment regarding the inability to realistically exceed 106.15% of the after completed value is obviously related to the representations regarding just the Streamline 203K. Since the EEM is not factored into the appraisal, you can finance a pretty extensive energy package without appraisal limitations becoming a limitation. |
| We have a pre-appraisal done. The appraiser does the physical inspection of the property to identify any compliance items that will be required to be repaired. As far as I know we are the only ones currently doing it this way. It is a far more strategic process and can save a tremendous amount of time and frustration. On either 203K loan product, the list of repairs must take priority over any elective items. | Under the structure as HUD suggests it and it is normally done, there are many issues that can be created. Under that approach the bids are finalized and then the Appraiser identifies what items have to be included in the bid. If those items were not already included the bids have to be completely redone and the Buyers have to decide what they are going to give up. |
| The Streamline 203K Program allows up to 50% of the bid to be released at the close of escrow. The other 50% may be released after the work has been completed and signed off by the homeowner; any contingency reserve is applied toward the principal loan amount. | Please note, not all Lenders will release the first half of the money at the close of escrow. You may want to confirm their policy with the Loan Officer being utilized.
Even though the second half of the money may technically be released at the completion of the work, it will generally take 2 to 4 weeks for this payment to be processed and that may vary. |
Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674
