In its effort to streamline and improve federally insured mortgage programs, the country's housing agency has loosened some requirements on its home improvement financing for purchases.
Lenders can now offer a Federal Housing Administration-insured, acquisition and rehabilitation loan without the home first undergoing repairs.
Provided that repairs needed do not exceed $15,000, sellers are now able to market their homes in "as-is" condition and sell them to FHA borrowers without making any amends to the property. The change is the result of a new streamlined version of the 203(k) Home Repair program, the U.S. Department of Housing and Urban Development, or HUD, recently announced.
Since Monday, the Streamline(K) Limited Repair program, as it is called, allows borrowers to add $5,000 to $15,000 to the loan amount to make required and other repairs after loan closing. The new product differs from the standard 203(k) program in that it provides financing for those who seek to make repairs that can be accomplished without paid consultants, engineers or plan reviewers.
In the past, some sellers and Realtors have not encouraged prospective borrowers to utilize FHA loans because of concerns regarding the government agency's presale repair requirements.
"The Department is committed to making FHA better, more modern, and more streamlined," said HUD Secretary Alphonso Jackson in a written statement. "This new mortgage product will help achieve that goal by enabling FHA borrowers to roll into the mortgage both the cost of the home and limited repairs."
HUD said the new program was developed in response to demand for a purchase-rehabilitation loan alternative that would be easier to administer, provide shorter processing time frames, and expedite cost estimates and approval.
Repairs under the streamline program do not require documentation from the borrower other than written estimates from appropriate licensed contractors. The repairs covered under the new program are restricted to categories such as roof replacement, heating system replacement, exterior painting, and other repairs that do not require professional assistance to evaluate the need, feasibility or quality of work.
Additionally, borrowers whose inspectors identify property conditions in need of repair can obtain financing to undertake the work needed.