Winter is just around the corner, and more than a few roofs across the country will surely be diagnosed by a professional roofing expert as “DOA, time to get a new one!”
If you have recently received the news of “you need a new roof” from your local roofing expert, perhaps it will help you feel better to know that FHA has a loan program that is designed to help finance things such as a roof replacement and makes it as easy as possible to get qualified and get the repairs done.
The loan program is called the FHA 203k streamline program and it is designed to allow homeowners to finance improvements for up to $35,000 into the mortgage. For those homes that need major rehabilitation, there is also a full FHA 203k loan which will allow more than $35,000 worth of rehabilitation work to be done.
Because the 203k streamline is an FHA program, all standard FHA guidelines apply when qualifying for the loan and you can choose an FHA fixed or variable interest rate when qualifying.
More Than New Roofs Are Eligible
Depending on the size of your roof, a new roof could easily cost more than $15,000 and for many families the easiest and most cost effective way to finance the cost of the new roof is to use the FHA 203k streamline program.
Many times when replacing a roof, there are other items that homeowners replace as well – heating/air conditioning systems, storm windows and doors, insulation upgrades and weather stripping. All of these items are also eligible for financing under the 203k streamline guidelines.
A short list of the most popular eligible improvements under the 203k streamline guidelines include:
- Repair/replacement of roofs, gutters and downspouts
- Repair/replacement of HVAC systems
- Upgrade of plumbing and electrical systems
- Exterior decks, patios or porches
- Storm windows/doors
- Purchase and installation of new appliances
- Disability access improvements
These things are not everything that is eligible under the 203k program, just the most popular improvements that people use the program for.
Using Licensed/Bonded/Insured Contractors
Under the 203k streamline guidelines, you must use contractors to complete the work unless you can provide documented proof that you can perform the work yourself (for example, if you are a licensed plumber or electrician) and the lender will verify that contractors credentials in the loan process. The contractor will also have to provide licensing, bonding and insurance documents and professional estimates.
Also, for the 203k streamline program a general contractor is not required, you can line up the sub-contractors who will complete the work yourself.
Payments To Contractors
Once the loan is approved and closed, the repair funds are held in escrow until payment is made to the contractor. You will have up to 3 months from your closing date to complete the work and no more than 2 payments (first payment and final payment) may be paid to the specific contractors. The first payment is limited to a maximum of 50% of the total cost and all payments are disbursed to the contractor unless the borrower is performing the work as approved earlier.
Why The 203k Streamline Program Is Popular
As a result of the credit crunch of 2008, many lenders have tightened their guidelines for Home Equity Lines of Credit (or even eliminated them altogether) and the 203k streamline program has become a more popular option for those people needing (or wanting) to make significant investments to improve their property.
Like those people who need a new roof!