Have you found your dream house, but the inspector says it needs repairs before you can buy it? This can often lead to a chicken-or-egg situation, since you can’t buy the house until the repairs are finished, but you can’t have it fixed until it’s bought!

Luckily, the Department for Housing and Urban Development (HUD) has the Streamlined 203(K) Limited Repair Program. Insured by the Federal Housing Administration (FHA), this 203(K) program allows homebuyers to acquire cash to repair and improve the house. Up to $35,000 can be released for this purpose. That amount will be integrated with the mortgage. The downpayment required is about 3% of the repair and property costs.

How the Streamlined 203(K) works:
When a potential homebuyer finds a fixer-upper house, a feasibility analysis of the property is commissioned, and a sales contract drawn up with a real estate agent. The buyer then seeks a 203(K) loan for the repairs and improvement. The sales contract becomes dependent on the loan’s approval.

Once the loan is granted, the homebuyer chooses an FHA-approved 203(K) lender, and arranges for a detailed repair plan and cost estimate. If the proposal is approved, the funds allowed for the repairs will be released.

Through a series of draw requests, the funds will be given to the contractor during construction. A percentage of the money will be held back until the work is finished. The remaining percentage will be released once the lender approves of the repairs.

For more information, please contact your local HUD or FHA representative. You can also get in touch with your local government offices.

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