What is a Streamlined 203K Loan?

These loans are named 203K after an amendment to Section 203K of the 1978 National Housing Act, which allows homebuyers to borrow funds to repair or rehabilitate single-family homes.

Home buyers looking at a fixer-upper home may not have the cash needed to do needed repairs or aren’t able to do the work themselves. Rather than buying the home and then taking out a second loan to have repairs done, a 203K Streamline loan allows the homeowner to lump the amount of funds for the rehab into the actual loan itself.

The Streamlined 203K Loan is different from what is known as the Standard or Full 203K Loan. A Full 203K Loan is for major repairs which will cost more than $35,000, requires much more paperwork, and requires a HUD consultant on the loan.

What Are the Requirements for a Streamlined 203K Loan?

Homeowners are allowed to finance an additional $35,000 into their mortgage to improve their home before they move in. The requirements for this loan is for the homeowner to pull together estimates from contractors to perform the work, however, there are stipulations on these contractors:

  • The contractor has to be licensed
  • The contractor can’t be a blood relative

You can also arrange to do some or all of the repair work under a self-help arrangement if you can provide the lender with documentation showing your expertise in your ability to perform the necessary repair work.

Other regulations on these loans are: the work has to start within 30 days of closing on the loan and the work needs to be completed within 6 months of closing.

What Kinds of Home Improvements Are Eligible Under the Streamlined K Program?

  • The repair or replacement of roofs, gutters, and downspouts
  • The repair or replacement of existing HVAC systems
  • The repair or replacement of plumbing and electrical systems
  • The repair or replacement of flooring
  • Minor remodeling, such as kitchens, which does not involve structural repairs
  • Painting, both exterior and interior
  • Weatherization, including storm windows and doors, insulation, weather stripping, etc.
  • Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers, and microwave ovens
  • Accessibility improvements for persons with disabilities
  • Lead-based paint stabilization or abatement of lead-based paint hazards
  • Basement finishing and remodeling, which does not involve structural repairs
  • Basement waterproofing
  • Window and door replacements and exterior wall re-siding
  • Repair or replacement of septic system and/or well

Major structural repairs such as foundation repair or build-outs require the full 203K loan.

Where Can You Get a Streamlined 203K Loan?

For more information on 203K Loans, visit the U.S. Housing and Urban Development Website.

Tip: If you’re going to do this type of loan the key is to hire the right contractor. Contractors typically don’t like paperwork but it’s needed to get the loan approved and also to get their payments as the job progresses. Hire a well-organized contractor and this process will go much smoother.

Use our Mortgage Calculator to figure out what your monthly payments would be.