The Federal Housing Authority or FHA also offers the 203k loan that is for light rehabilitation to a dwelling that requires $35,000 in repairs or less.  This is called the Streamline 203k loan. The Streamline 203k loan is great for buyers who may pass on a home because it needs minor repairs.  This loan is different from major rehab 203k loan and eliminates paperwork and simplifies the rehab fund process.

How it Works

The Minnesota 203k Mortgage for light rehabilitation works for homes for sales as well as improvements to existing homes.  Its features include 30 year fixed or adjustable loans, 110% loan to value ratio, appraised value is given after the improvements are made to enhance the homes worth, and is great for minor rehabilitation repairs or revitalization.

You must occupy the home within 60 days after the repairs are completed and funds are disbursed to the contractor you pick in two stages.  First, a 50% materials draw is funded and when the completion of repairs is 100%, the remainder of the funds is released.

Quick Facts

The Streamline 203k minor rehab loan may be calculated into the original loan balance creating one loan.  It can be an adjustable or fixed rate and the mortgage balance can exceed the purchase price of the property.  Borrowers do not have to hire professional engineers or architects.  A home inspector or an appraiser will create a list of needed or recommended repairs or improvements and you can do the repairs yourself, or hire a contractor.

Eligible Rehab Repairs

The Streamline 203k loans is used mostly for light cosmetic repairs not exceeding $35,000 and includes roofs, gutters, and downspouts.  It may also be used for HVAC systems, electrical, plumbing, minor improvements to kitchens or bathrooms, flooring, interior and exterior painting as well as new windows and door and weather stripping and insulation.  The 203k light rehab loan encourages funds for handicap accessible improvements, energy efficient additions, removing lead paint, and the addition of decks, patios, porches, septic and well system.  A buyer may also purchase new kitchen appliances and a washer or dryer.

Ineligible Rehab Repairs

Items not eligible for the 203k Streamline light rehab loan are landscaping and yard work and major remodeling or rehabilitation to any dwelling.  It is also not for moving walls, adding rooms or fixing extensive structural damage.

What Are the Terms?

With the 203k light rehab loan, no minimum loan balance is required; however, buyers must intend to occupy the property once the light rehab repairs are complete.  The property may not be vacant for more than 30 days and all work must be completed within six months.  You do not have to hire a HUD approved contractor; however, a professional must complete your light rehab repairs.  All repairs must commence within 30 days after the closing.

Who Does the Work?

The 203k light rehab mortgage allows the buyer to select their licensed contractor and the lender will review the contractor’s experience.  The lender will get a firm estimate from the chosen contractor and buyers may even arrange to complete some of the work themselves.  If you go the do-it-yourself route, the lender will require documentation showing that you are qualified to complete the light rehab repairs.

Summary

The Minnesota FHA 203k light rehab mortgage is great to make improvements to your owner-occupied home if the repairs are under $35,000.  If the repairs fall below $15,000, the lender is not usually required to perform an inspection and a letter from the borrower is sufficient along with contractor receipts as notice of completion of work.

Perspective homeowners have the ability of buying a home in need of light rehab repairs through the FHA 203k loan. The 203k Streamline line loan may also be used as a home improvement loan. If the home you are looking at needs minor rehab repairs, please contact us about the 203k Streamline loan.

With our offices located in Edina, Minnesota we can easily help client in our direct community as well as surrounding Minneapolis and St. Paul suburbs.  We are licensed in the state of Minnesota and have the ability to close loan throughout the entire state.