203k Streamlined Vs. 203k Standard Full Rehab Loan

FHA offers two types of FHA 203(k) mortgages for buyers and current homeowners, with the main difference being in the amount of money lent, as well as the type of renovation work involved.

Standard 203k – also called Full or Regular, and Streamlined – also called the Streamlined K or Limited Repair Program.

Both types can be used for purchase and refinance. A stipulation for both types of FHA 203k loans is that the total amount financed must not exceed 110% of the projected, “as-improved” value.

All 203k programs allow borrowers to finance the purchase price of the property, the closing costs, plus the cost of repairs. The additional funds are held in a Rehab Account, and pre-determined payouts provide the homebuyer with cash to pay for property repairs or improvements after the loan closes.

“Streamlined (k)” Limited Repair Program

The FHA Streamlined 203k has no minimum loan amount requirement and is designed for homes that need non-structural repair, upgrades or modifications. This loan option allows borrowers to finance the purchase price plus up to an additional $35,000 into their mortgage to pay for upgrades or improvements.

One of the main differences with the Streamlined (k) is that borrowers are not required to work with an FHA-designated Consultant to complete their rehab project.

The Streamlined 203(k) has fewer requirements and is designed for smaller, less complicated, lower-cost projects that are considered “cosmetic” improvements, such as minor roof repairs, paint, new appliances, flooring, a new heat and air conditioning system, or doors and windows.

The use of an FHA-designated Consultant is not necessary with the Streamlined 203(k). This option is used when an architect, engineer or multiple inspections are not required.

Standard 203(K) Loan program

The Standard 203(k) was created specifically for projects that warrant extensive work or repairs, projects that will take longer than six months to complete, or when rehab costs will exceed $35,000. Standard 203(K) loans have no maximum repair amount.

The Standard (K) loan option must be used when a property requires or the borrower requests structural work, such as a room addition or the removal or relocation of an interior or exterior wall. A Standard 203(K)is also used if the project requires engineering or exterior grading or inspections.

The Standard 203(K) must be used if the renovation work will prohibit the homeowner from occupying the residence during the process. If the home is considered uninhabitable, up to six months of mortgage payments can be financed to cover monthly loan payments during the renovation process and help the homeowner pay for alternate housing during construction.

The maximum mortgage amount allowed for a standard 203(K) is based on whichever is less:

• The as-is value of the property plus the costs of repair and rehabilitation, or
• 110% of the projected value of the renovated property

FHA-Designated Consultant Required on A Standard 203(K)

On a Standard 203(K) loan, FHA requires that an FHA-designated Consultant create and document a work plan before they will approve the loan. The Consultant’s job is to ensure that the work meets FHA and local building code requirements.

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