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Serving the Greater Denver Metro Area

Limited 203k

The Limited 203k which used to be called Streamline, is designed for small projects. You need at least $5,000 in repairs but not more than $35,000. If the project is above $35,000, it will not qualify for the Limited 203k. Instead you will be required to take advantage of the Full 203k.

Many borrower fail to understand the process and requirements. For instance, a Limited 203k will allow up to $35,000 mortgage. However, there is a 10% hold back called a Contingency Reserve that is added to the amount of the loan. If your total repairs are $35,000 the 10% contingency is then added to the repair amount. This will put you over the limit and bump you into the Standard 203k. Therefore, when calculating your repairs you will need to keep them around $31,500. Because when the Contingency is added you need to be under $35,000 to qualify for a limited 203k.

An inspection of the property will need to be done by a Certified 203k Consultant. This inspection will inform the borrower of any FHA required repairs that may be in addition to the repairs the borrower elects to do. All FHA required repairs must be satisfied before any elected repairs are done. If this inspection discovers some structural issues you will not be able to utilize the Limited 203k program.

FHA does not require a Consultant for a Limited 203k. However, the lender will usually require a consultant because the consultant will make the process go so much smoother and more likely to meet the deadline and get the project to closing. It is recommended to use a consultant even if the lender doesn’t require one. You will find this process very time consuming and difficult without that aid of a consultant. The few dollars you save isn’t worth the frustration.

A General Contractor is needed to do the work. In some rare cases the home owner can do their own work if the lender approves them. However, they can’t get paid for their labor. A contractors bid is still required and the loan will be figured on the contractors bid in case the home owner fails to complete the work.