One of the Best Kept Secrets In Home Loans: The Streamline Rehab Program
One of the best programs available for homeowners and buyers in today’s market is the Streamline Rehabilitation Program, aka Streamline 203(k). Unfortunately, most homeowners and buyers are never even told that the program exists. But it does, and for those who qualify, it can make all the difference in the world in terms of making repairs to your current or future home. In fact, you can refinance your home or purchase a new home while taking out up to $35K for repairs.
The Streamline 203(k) is available to homeowners or buyers who may not qualify for a loan with traditional programs through Fannie Mae or Freddie Mac. That makes it a perfect program for homeowners and buyers who cannot reap the benefits of Obama’s Home Affordability program. It also makes it a great program for homeowners with loan of more than $417K, but less than $625K. With the Streamline 203(k), you may qualify to refinance over the current value of your home and include the cost of home repairs and improvements. You can do this all with very little equity. Best of all, in doing so not only will you be able to repaint your home, upgrade your appliances, replace water/heating/cooling systems, and more; but through the loan, you may actually lower your monthly mortgage payment.
Consider for example that your current interest rate is near 6%. Even though refinancing into the FHA loan will require you to purchase Mortgage Insurance, the savings may very well be worth it, as you may refinance into a payment in the 4% range. The monthly savings can add up to thousands of dollars saved over the year, all the while increasing the value of your home. Candidates for this type of refinance, will include anyone who wishes to lower their interest rate, and certainly any homeowners who have a 3, 5, or 7 year fixed rate loan, as once it expires your rate is likely to increase.
The Streamline 203(k) is also a great product for home buyers, including first time home buyers. After you satisfy your initial down payment required by FHA (3.5%), which will include the cost of the home, plus the estimates for repairs, you’ll be able to finance the additional money you need for repairs into your loan. This program is also available to home buyers purchasing an REO (aka a foreclosed property).
There are some caveats to the program. You will need to use a licensed and bonded contractor or a Home Improvement Store. Most importantly, this extra cash cannot be used for personal or luxury items like pools or spas, but it can be used to build a deck or fence. The money must be used to improve the quality and/or appearance of your home. This includes a home you may be purchasing or if you want to refiance your existing home.
So why doesn’t anyone talk about this loan? Aside from the fact that not all brokers are FHA certified lenders, we’re stumped. You can easily lower your interest rate, save money each month and upgrade your home. If there is any catch to be found it’s in the requirement that you’ll have to purchase Mortgage Insurance. But we’ve run the numbers time and again, and this program still saves money. If you need to make repairs to your home, without exhausting savings, it’s well worth looking into. For information on the Streamline 203(k), visit http://www.hud.gov/offices/hsg/sfh/203k/203kmenu.cfm