HUD Programs

If you’ve been passing up buying a home because it requires cosmetic repairs, FHA has a special mortgage program (203k Rehab) that provides funds for repairs and/or upgrades.

Not to be confused with FHA’s full 203k program, a Streamline 203k loan eliminates much of the paperwork and simplifies the process to obtain rehab funds. The primary function of the Streamline 203k is to aid with those cosmetic or minor repairs.

1. FULL 203k

A feasibility study is a quick inspection of the property with the Borrower to determine minimum property standards (MPS) and if the desired work qualifies within the loan amount. The consultant retainer fee of $300 and the feasibility fee of $100 are due at this time. Then the consultant prepares a Preliminary Work Write-Up (PWWU) to present to general contractors for bids. If the project does not proceed after the PWWU is prepared, the $100 is refunded. The Borrower will be asked to sign a separate Consultant Borrower Agreement outlining the fee amounts and the Consultant’s responsibilities to the Borrower.

203k Work Write-Up

After reviewing the Preliminary Work Write Up (PWWU) with the Borrower noting life/safety issues to be performed, FHA Minimum Property Standards (MPS) and required repairs, Borrower’s wish list, modifications or upgrades desired, verifying that the property meets the $5,000 minimum repair value to be eligible for the HUD 203K project, the Consultant will then invite contractors (unless the Borrower has already chosen a contractor) to bid on the project for the Borrower to choose from the list. The contractors will not be privy to the Consultant’s estimated figures.      

Once a contractor has been chosen, the Consultant will require the HUD approved fee (as per HUD scale based on the amount of the rehabilitation cost) to be paid by the Borrower prior to submitting the final WWU to the underwriter. The Consultant will reduce the WWU fee by $300.00 which was part of the initial consulting fee of $400 (i.e. $100 feasibility fee and $300 retainer fee). The Borrower is allowed to escrow the Consultant fees into the loan and be reimbursed the fee amounts. The Consultant will prepare a Contractor Borrower Agreement outlining the Contractor’s responsibilities to the project. This agreement allows the Borrower to terminate and assign a new contractor to the project if necessary. The final HUD 203k WWU is submitted to the underwriter for processing.

2. Streamline 203k

The Streamline program provides funds for purchase, repairs, upgrade. There is a maximum of $35,000 less 10% contingency (i.e. $31,500 working capital) which can be financed in the mortgage amount to improve or upgrade the home. No structural repairs.   

Minimum required repairs include any health and safety repairs like peeling lead paint or replacing missing railings.  All health and safety issues must be addressed first.

Type of Work for Streamline 203k:
  • Roof repair, gutters, downspouts
  • Existing HVAC systems
  • Plumbing and electrical systems
  • Flooring
  • Painting
  • Appliances
  • Weatherization
  • Repair, replace or add exterior decks, patios, porches
  • Basement waterproofing
  • Window and door replacement and exterior siding
  • Septic and/or well repair or replacement
  • Improvements for accessibility
  • Lead-based paint stabilization or abatement of lead-based paint hazards
What Can’t You Do? Ineligible Improvements Under the Streamline 203k:
  • Major structural repairs
  • New construction (adding a room)
  • Repair of structural damage
  • Repairs requiring detailed plans and specs
  • Any repair taking more than 3 months to complete
  • Repairs that would necessitate more than 2 draws
  • Luxury items that are not a permanent part of the real estate
  • Jacuzzi tubs, hot tubs, pools
What Does Your Contractor Need to Do?
  • Provide written work plan and cost estimates
  • Must include nature and type of repair and the cost of completion
  • Must be licensed and bonded for each specialized repair
  • Must agree in writing to complete the work for the amount of the cost estimate and within the allowed time
  • Must have an EPA lead paint certification