What’s the Difference? — Full FHA 203K & Streamline 203K?

Easy question right? Full FHA 203K over $35,000 and the Streamline 203K under $35,000. Post over right?

Sadly no. I get calls every daily from distraught homebuyers, distraught Realtors and distraught loan officers who’ve had a streamline 203K denied. Denied not because of the 203k renovation amount, denied because the scope of the work did not fall under streamline 203k guidelines.

Here are some of the biggest streamline 203k deal killers:

1.) Termite Damage — When I worked as a mortgage broker and didn’t have access to the full 203K this was the single biggest deal destroyer in the renovation loan market. A termite letter is not required by all lenders, but it is required by some. If you live in the South and are looking to buy an older home then there’s a good shot that house has had termites at some point. Termites eat joists, they eat subfloors, they eat things that are structural in nature. Any structural damage is automatically a full 203K, no exceptions. Be aware of this issue.

2.) Framing — Yeah, you might think taking out a wall to make the bathroom bigger is cosmetic, but you are not an underwriter. Moving a load bearing wall is structural and is not an eligible streamline 203k repair. But, but, this wall is not load bearing! Says who? Your contractor? Want to pay $400 for a Structural Engineer’s report to verify? I didn’t think so. Moving walls means you need a full 203K.

3.) Subflooring — Yeah, I love those house built in the 20’s as well. Problem is, those houses have settled. Your indoor putting surface will take on a new level of difficultly in most of those houses. No problem, lets level this out! Nope, not with a streamline 203K. That is also structural, you’ll need a full 203K for that.

4.) Landscaping, Grading, Site Amenities — The drainage is bad and the driveway sucks, I want to fix that! Sorry, not on the streamline 203K. No landscaping and no site amenity improvements are allowed. You’ll need a full 203K for that too.

I guess you are out of luck buying that fixer upper. You’ll probably never get a loan. Your destined to be paying your landlord’s rent or hearing your upstairs neighbors playing Guitar Hero forever. Don’t throw the towel in just yet though. When you are searching for a 203K Renovation lender just make sure they offer the full 203K as well. With access to both products you can eliminate any of the potential streamline 203K deal killers you may face. Luckily we have you covered, we can even help investors renovate via the Fannie Mae Homestyle. So get out there and buy yourself a heap, we’ll fix it up for you!

APPLY NOW for your FHA 203K Renovation Loan!!

Jonathan Blackwell FHA 203K Renovation Specialist Wells Fargo Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

Brian Wiesner says:

April 7, 2009 at 6:29 pm

Hey Jonathon…great insight into the 203K’s. But our HUD consultant out here in CA says we specifically can spend up to $1,500 on irrigation and landscaping. Anything that “increases the curb appeal” of the house. (read neighborhood values) Brown grass is no good out here. Maybe a different interpretation specific to the market.

Jonathan Blackwell says:

April 8, 2009 at 10:22 pm

Thanks Brian! One key part of your comment is “our HUD consultant” says… HUD Consultants are only required on Full 203K loans. Full 203K loans will allow SOME landscaping if the underwriter can determine that it increases the property value.

Streamline 203K loans don’t allow landscaping at all, per HUD, unless you can unequivocally prove that the landscaping is needed for the safety and longevity of the house. With that said you can sometimes get grading / erosion issues through underwriting on a streamline 203k.