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The Taft area has affordable housing for sale; however, many of the properties are in need of repairs in order qualify the house for first time home buyer loan programs, which many people are using to purchase homes. How do you get around this? Very simply, by using what is referred to as a 203k loan program.

There are two possible choices for the FHA Rehabilitation Loan Programs (203)k the Regular Rehabilitation 203k, and the Streamline Rehabilitation Loan. Both allow for repairs to the property to be financed. The repair costs are funded at the time the loan closes, which then said funds are distributed through escrow upon completion of the repairs. This means that the escrow closes (house is paid for from the purchase loan), and then the repairs are completed and paid for- then you move in!

After qualifying for the FHA loan program, the buyer ,using either 203k loan programs, must contribute the minimum down payment of 3 – % of the total cost of the home and repairs. For example the house is purchased for $80,000 and the repairs are $20,000 so that the total amount of the loan is $100,000. The buyer would then need a minimum down payment of $3,500.

Because of the high rate of REO’s on the market and with so many persons qualifying for the first time home buyer loan programs, this makes for a great tool towards homeownership. However, not all of the features offered in the regular rehab are available with the streamline.

In the Streamline Rehab program there is no minimum required repair threshold and the maximum limit on repairs is $35,000. No general contractor’s detailed drawings or architectural drawings are required; a licensed and bonded contractor must perform the work. Payment to the contractor is set up in no more than two payments. There are no special inspections requirements if the cost of repairs remains under $15,000. A money reserve in the repair loan or contingency is not required although your lender may require one anyways. Eligible repairs for the streamline include: replacement or repairs of roofs, gutters, downspouts, heating/cooling and a/c systems, plumbing and electrical systems, flooring, windows, doors, exterior siding, well, and septic systems. Minor repairs include remodeling (not structural), painting interior and/or exterior, free standing appliances such as range, refrigerator, washer/dryer, etc. (NOTE: this list is not all-inclusive). Ineligible for the streamline program are major rehabs such as moving weight baring walls, room additions, and new construction. This would also include any work that requires detailed drawings or architectural exhibits, or repairs of structural damage. Landscaping is not included with either program. All work must be completed within 60 days of the start period.

With the Regular Rehab there is threshold of a minimum of $5,000. There is no maximum limit of repairs, however, general contractor and normal architectural drawings are required. There is an allotment of up to five payments to the contractor who must be licensed and bonded. An FHA Inspector is required for all repairs no matter what the loan amounts are. Unlike the Streamline Rehab loan a 10% contingency reserve is required although the lender may require more. All work must be completed within 6 months of closing escrow. In addition to the items that are allowed to be repaired in the Streamline Rehab, the Regular Rehab allows for structural changes, room additions, and additional living units (as allowed by the city). And up to 6 months of mortgage payments can be financed into the loan.

If any of the funds designated to repairs in either program are not used, the borrower does not receive the difference in cash. The money is not lost however; it is applied to the principle loan amount of the borrower. In the end there will be only one loan on the property.

Home ownership is made easier with the 203K loan programs. Many times for the cost of rent and sometimes even less, a person can purchase a home and start investing in their future. You may contact Karri Christensen at 661-332-6597 or stop by at 325 Kern Street in Taft for more information.