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Streamlined K Mortgage
Streamlined (K) Mortgage
A Streamlined (K) Mortgage is a mortgage backed by the FHA that allows an additional amount to be mortgaged for home improvements. With the Streamline 203(k) Mortgage the borrower can acquire up to $35,000 in additional financing to make improvements that would increase the home's value. Another option offered by the FHA is the Streamlined (K) which allows the borrower to add an additional $5,000 to $15,000 for improvements instead of a full $35,000. With this option at least the minimum must be borrowed and there are more restrictions on the work that can be done.
Streamline (K) Mortgages are ideal for first time homebuyers and fixer uppers. They have the flexibility of having either a fixed or adjustable interest rate and can exceed the purchase price of the home. The reasoning behind this is that the home is expected to increase in value after the home is improved. To assure this the FHA only allows certain improvements to be made. These include:
- Roofs and gutters
- Plumbing and electrical
- Decks, porches and patios
- Basement improvements (completion and waterproofing)
- Septic and well
- New appliances
- Weather stripping
- Energy efficient improvements
- Insulation
- Windows and doors
- HVAC (heating, ventilation and air conditioning)
- Minor kitchen and bathroom remodelling
- Flooring
- Painting (indoor and outdoor)
- Disabled person improvements (ramps, elevators, etc.)
Improvements that are not eligible under a Streamlined (K) Mortgage include:
- Structural damage
- Moving a wall that supports weight
- Additions or add-ons
- Major remodelling
- Landscaping
Some of the terms and requirements that go along with a Streamlined (K) Mortgage include:
- There is no minimum amount that has to be borrowed
- Borrower must occupy property (property can't be vacant more than 30 days
- Work must start within 30 days of loan closing and must be completein 6 months
- Work must be professional (contractors, or borrower, must submit proof of capability to complete work being done)
- Borrower is responsible for obtaining necessary permits
If the borrower decides that they don't need the full $35,000 for home improvements there are less restrictions and requirements if less than $15,000 is borrowed. For example the lender isn't required by the FHA to inspect the final work, a letter from the borrower or contractor receipts suffice for proof of work completion. To apply for a Streamlined (K) Mortgage see HUD Form 92700 - (203k) and Streamlined (k) Maximum Mortgage Worksheet.