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Renovation/Remodeling Programs
Founded in 1921, family- and employee-owned HomeStreet Bank is one of the largest
privately held banks in the Northwest and Hawaii. Headquartered in Seattle, HomeStreet has
a network of 30 branch and mortgage offices in the Northwest and Hawaii. HomeStreet
Bank offers a full range of financial services, including business banking, business lending,
consumer banking, mortgage lending, residential construction financing, income property
financing and insurance services. HomeStreet Bank is one of the very few banks recognized
by the federal government as "Outstanding" under the Community Reinvestment Act.
Revised 5 110
Renovation/Remodeling Programs
HomeStreet Bank remains the leader in providing loans for home renovation and remodeling.
Our flexible loan programs allow you to purchase or refinance an owner occupied home, with
up to four units, combining both the purchase (or, in the case of refinancing, the outstanding
mortgage balance) and the renovation or remodeling costs into one fixed-rate loan. Flexible
adjustable rate mortgages are also available.
We recognize that every renovation proj ect is unique, so we offer a variety of funding options
to meet various needs. This booklet will help you understand the variety of funding options
we have available. As you review the different options, please let your HomeStreet Bank
home finance professional know if you have any questions. They can help you find the
program that best fits your needs.
D Fannie Mae
Revised 5/1 0 2
Streamline FHA 203(k) Limited Repair
How the program can be used:
The Streamline program follows the same guidelines as the standard FHA 203(k) with the
following exceptions:
• Cost of work to be performed must not exceed $35,000
• No contingency required
• A consultant is not required
• A General Contractor is not required
• Architectural exhibits and plan reviewer not required
• No draw inspection fees - a final inspection is only needed for repairs exceeding
$15,000
• Only two draw payments will be made during the renovation
Revised 5/1 0 3
Repairs NOT eligible under the Streamline 203(k) program:
Revised 5/1 0 4
The Life of a Streamline 203(k) Loan
5. Prepare description of materials and narrative to include both needs and wants
6. Appraisal is ordered
8. Loan is approved
Renovation complete!
Revised 5/1 0 5
Standard FHA 203 (k)
The program is designed to accommodate major repairs and renovation projects in excess of
$35,000.00. The loan can be used to accomplish renovation and/or improvement of an
existing one- to four-unit owner-occupied dwelling in one of three ways:
+ To purchase/refinance a dwelling on another site, and then move the dwelling onto a
new foundation on the mortgaged property.
Required Improvements:
+ Any deficiencies noted or work orders required in the listing or purchase and sale
agreement.
+ Deficiencies noted by the home inspector, pest inspector or appraiser
+ All renovation, construction and/or additions financed with standard FHA 203(k)
mortgage proceeds must comply with health, safety and energy standards.
+ Cosmetic repairs
+ Structural alterations and reconstruction
+ Changes to improve function and modernization
+ Elimination of health and safety hazards
+ Installation of well or septic
+ Roofing, siding, gutters and downspouts
+ Windows and doors
+ Flooring, tiling and carpeting
+ Major landscaping
+ Handicapped accessibility alterations.
Revised 5/1 0 6
Repairs may NOT include:
+ Barbecue pit
• Bathhouse
• Dumbwaiter
+ Exterior hot tub
+ Sauna
+ Spa and whirlpool bath
+ Outdoor fireplace or hearth
+ Photo mural
+ Installation of new swimming pool
+ Gazebo
+ Television Antenna
+ Satellite dish
+ T ennis court
• Additions or alterations to provide for commercial use
Req uirements:
HUD requires that a complete home inspection by a HUD-approved consultant and a pest
inspection by an independent third party be completed on the property to determine if there
are any items that would affect the health, safety or structural integrity of the subject
dwelling. And, if found, those items would need to be fixed.
+ Additions to existing structure. New construction must conform to both local codes
and Housing and Urban Development's (HUD's) minimum property standards.
Revised 5/10 7
Limitations:
+ The county loan limit is set by FHA-HUD, based on the number of units in the dwelling.
Call your HomeStreet Loan Officer for loan limit specifics.
Eligible properties:
To be eligible for the program, the property must be one-to four-unit family dwelling, which
has been completed for at least one year. All newly constructed units must be attached to
the existing dwelling. In addition to typical home renovation projects, this program can be
used to convert a one-unit family dwelling to a two, three, or four-unit family dwelling. An
existing multi-unit dwelling could be decreased to a one- to four-unit dwelling. The number
of units on the site must be acceptable according to the provisions of local zoning
requirements. Homes that have been demolished, or will be demolished as part of the
renovation, are eligible provided the existing foundation system is not affected and will still
be used. The complete foundation system must remain in place.
Eligible improvements:
Mortgage proceeds must be used in part for renovation and/or improvements to a property.
There is a minimum requirement of $5,000 for the eligible improvements of the existing
structure on the property.
When basic improvements are involved, related fixtures such as cooking ranges,
refrigerators, and other appurtenances, as well as general painting (including the resolution
of lead-based paint problems) are also eligible. However, all of these must be in addition to
the initial $5,000 requirement. Construction or renovation of a detached garage is
acceptable.
Revised 5/10 8
Construction-Consultant Fee Schedule
Consultant Fees
Cost of repairs Fee
Less than $7,500 $400.00
Between $7,501 and $15,000 $500.00
Between $15,001 and $30,000 $600.00
Between $30,001 and $50,000 $700.00
Between $50,001 and $75,000 $800.00
Between $75,001 and $100,000 $900.00
Over $100,001 $1000.00
3. Additional unit review: $25.00 per unit. For this fee, the consultant inspects the property
and provides all required architectural exhibits.
When travel exceeds 25 miles round trip from the consultant's place of business, a mileage
cost is established at current mileage rate, and may be added to the above charges, including
road tolls and other charges where applicable.
2. If additional inspections are required by the lender to ensure satisfactory compliance with
architectural exhibits, the borrower or contractor will be responsible for payment.
Revised 5/1 0 9
The Life of a Standard 203(k) Renovation/Remodeling Loan
2. Locate a house (when the loan is being used for a purchase transaction)
4. Set a meeting with Consultant, Buyer, and Contractor: Pest & Structural
6. Prepare description of materials and narrative to include both needs and wants
7. Appraisal is ordered
9. Loan is approved
10. Loan is closed and title is transferred ~ you own your home
Renovation complete!
Revised 5/1 0 10
Renovation/Remodeling Checklist
The following checklist and steps will help you complete a successful
renovation/remodeling project:
• Meet with your home loan consultant to determine your proposed project.
• A wish list is a way to review YOUR reason for doing the remodeling or renovation.
One way to organize this list is by developing categories, for example:
a)The "must be included" (i.e., replacing a bad roof, dry rot, poor siding)
b)The "would be nice if possible" (i.e., kitchen remodel, carpeting, new garage)
c)And, the "under no circumstances" (i.e., over improving for neighborhood)
Consult construction professionals for additional ideas, but keep in mind that this project is
for you. Continue to review this list from time to time to see if decisions you are making fit
with your original ideas.
• Start a project budget immediately and review this budget at every step of the process.
You may not be able to control all of the cost changes, but you can set a realistic budget
and keep the project within that range.
Revised 5/1 0 11
Common questions about the 203(k) program:
t. Can all of my funds for down payment and closing costs be gifted?
Yes, consult your Loan Officer for specific criteria.
2. What is the minimum amount of renovation required for the 203(k) program?
There is a minimum $5,000 requirement for the eligible improvements on the existing
structure on the property.
3. Can I exceed $35,000 in renovation costs with the Streamline 203 (k)
No. The $35,000 is a maximum limit for a Streamline 203(k). Keep in mind that bids
often change after application, and the $35,000 limit includes closing costs, if they are
financed. This is an important element for the client and Loan Officer to recognize, as
projects that exceed $35,000 will not be eligible for the Streamline 203(k).
4. Are there any differences between "Cosmetic" Streamline 203 (k) loans and
other Streamline 203 (k) loans?
There are not two different Streamline loans, but there are two different loan limits -
$15,000 and $35,000. The most important difference has to do with the number of draws
allowed and with final inspections. Ask your HomeStreet Loan Officer about how this
applies to your specific project.
7. Can the 203(k) program be used to move an existing house onto another site?
Yes. However, release of loan proceeds for the existing structure on the non-mortgaged
property is not allowed until the new foundation has been properly inspected and the
dwelling has been properly placed and secured to the new foundation.
Revised 5/10 12
9. Is there a limit on the renovation construction period?
Yes. The Renovation Loan Agreement contains three provisions concerning the time lines
of the work: 1) the work must begin within 30 days of execution of the agreement; 2) the
work must not cease prior to completion for more than 30 consecutive days; and 3) the
work is to be completed within the time frame allowed by the HUD approved
construction consultant following the execution of the agreement; not to exceed 6
months.
10.What happens if the borrower fails to perform under the terms of the
agreement?
HomeStreet Bank may refuse to make further releases from the renovation escrow
account. The funds remaining in the account can be applied to reduce the mortgage
principal. Also, the lender has the option to call the mortgage loan due and payable.
12. How many draw releases can be scheduled during the renovation period?
As many as five for a standard FHA 203(k). The number of releases are normally
dictated by the cash-flow requirements of the contractor. An inspection is always
required with a scheduled release. However, inspections may be scheduled more often
than releases if necessary to ensure compliance with the architectural exhibits, HUD's
minimum property standards, and all codes and ordinances. Only two draw releases will
be made for Streamline FHA 203(k) program.
14. Can the renovation estimate be modified after the mortgage loan is closed?
Yes. The changes must be approved by the construction consultant and the lender prior
to beginning the work. If the change affects the health, safety, or necessity of the
dwelling, the contingency reserve can be used to pay for the change. Any cost savings or
unused contingency will be applied towards the mortgage balance.
15. What happens if the cost increases during the renovation period? Can the
203(k) loan amount be increased to cover the additional expenses?
No. This emphasizes the importance of carefully selecting a contractor who will
accurately estimate the cost of the improvements and satisfactorily complete the
renovation at or below the estimate.
Revised 5/1 0 13
Fannie Mae
The Fannie Mae program can be used to accomplish renovation and/or improvement of an
existing one- to four-unit dwelling in one of the following ways:
• To purchase/refinance a one-unit dwelling and the land on which the dwelling is located
for second homes and investor properties.
Requirements:
Renovations and/or improvements done without a licensed general contractor are permitted
on a "case by case" basis. Underwriting may allow the use of a consultant as a 3rd party to
oversee project in lieu of a general contractor. Consult your Loan Officer for further details.
Eligible improvements:
Fannie Mae renovations provide the flexibility to finance the improvements that HomeStreet
Bank and the borrower mutually agree upon. Fannie Mae does not specify which
improvements a borrower mayor may not finance. The borrower determines the cost of
renovation based on licensed contractors' or construction consultants' itemized bids on all
work. Certain soft costs of construction may be included in the renovation cost. "Sweat
equity," however, is not included. Licensed contractors must perform the renovation work.
There are no restrictions on what a borrower may choose to finance in their renovation.
However. it needs to meet acceptable appraisal standards.
Revised 5/1 0 14
Limitations:
• After the renovation is complete, the property generally should be conforming to the
neighborhood in terms of value, size, etc.
• The loan limit is set nationwide by Fannie Mae, based on the number of units in the
dwelling. The maximum amount of renovation, including any financed mortgage
payments, may not exceed 50 percent of the property. For example, if the after
completed value is $150,000, the maximum amount of renovation that could be
financed would be $75,000.
Eligible Properties:
One- to four-unit properties, condominiums, and PUD that meet Fannie Mae's standards are
eligible for owner-occupants. Only one-unit properties are eligible for second homes and
investors.
The maximum loan to value ratio (L TV) for purchase/refinance properties are:
*requires private mortgage insurance. Private mortgage insurance qualification and restrictions apply
Revised 5/1 0 15
The Life of a Fannie Mae Renovation/Remodeling Loan
5. Prepare description of materials and narrative to include both needs and wants
6. Appraisal is ordered
8. Loan is approved
Renovation complete!
Revised 5/10 16
Commonly asked questions about the Fannie Mae Program:
5. Can the Fannie Mae program be used to move an existing house onto another site?
No.
6. Is there a minimum amount of renovation required for the Fannie Mae program?
No. However, there is a restriction on the percentage of a property's "as-completed" value
that the renovation costs may represent (50%). For example, if after-improved value is
$150,000 then HomeStreet Bank can include in the loan amount up to $75,000 in total
renovation costs.
8. What happens if the borrower fails to perform under the terms of the agreement?
HomeStreet Bank may refuse to make further releases from the renovation escrow account.
The funds remaining in the account can be applied to reduce the mortgage principal. Also,
HomeStreet Bank has the option to call the mortgage loan due and payable.
9. How many draw releases can be scheduled during the renovation period?
As many as nine. However, the number of releases is normally dictated by the cash-flow
requirements of the contractor/consultant. An inspection is always required with a scheduled
release.
Revised S fl 0 17
The Steps in the Renovation/Remodel Process
• It should be stated in the sales contract that the borrower is applying for
renovation/remodeling financing.
• The contract must be contingent upon the buyer's acceptance of the required work that
will be determined by the pest and structural inspection of the property.
• The seller must allow access to the property for the inspectors, contractors, or
consultants who will be estimating the damage to the property and the cost of repairs.
If the sum of the estimated renovation/remodel cost and the purchase price or "T/A" (total
acquisition), or existing debt, if the loan is a refinance, are equal to or greater than the value
of the comparable properties, the project would be considered feasible.
The home inspection is the cornerstone of a successful renovation project. As a part of the
application process for FHA 203(k) renovation loan, a home inspection report on the current
condition of the property is required. In most cases, the home inspection report will be the
underwriter's only "view" ofthe property in it's as-is condition. HomeStreet Bank is not
looking for the inspector/consultant to make the house perfect, but to determine if there are
any items wrong that could, or would, affect the health, safety or structural integrity of the
house.
Revised 5/1 0 18
• Wood boring insect damage: A certificate of inspection is required from a professional
inspection company. Evidence of past or current infestation and a report on structural
damage is to be included along with information on how to correct the problem.
+ Health and safety concerns: A report on any item in the property that may affect the
health and safety of the occupants.
• Major systems: A report is required on the adequacy of existing structural, heating,
plumbing, electrical and roofing system.
+ Private water: Individual well water systems will require certification and the work
write-up should address any corrective measures recommended.
+ Connection to public water/or sewer: Whenever feasible, all efforts are to be made to
connect the property to an available public water/or sewer system.
• Septic certifications: Private septic systems are to be inspected and a copy of the
inspection report attached to the work write-up, including any recommended repairs,
improvements, or treatment.
Inspection tips:
Exterior:
Soil properly sloped away from the house.
Earth/wood contact? There should be a 6-inch minimum clearance.
Debris accumulation next to building or on roof.
Leaking gutters or downspouts.
Fixed windows with no caulking at their bases.
Roof flashing around chimneys and vents properly installed.
Siding and trim intact.
Mortar joints in brickwork sound.
There are many other items to look for but the items above are the main culprits in allowing
water to wick or leak into wall or floor voids, causing damage due to rot or wood-destroying
insects.
Roofs:
Upward curl of shingles typically indicates overheating. Downward curl normally
indicates worn-out roof.
Having to strip all layers of roofing material may double the cost of the roof.
Cedar shake normally lasts 20 years with spot repairs needed prior to re-roofing.
Hot tar roofs will normally last 10 years.
90-lb. Roll roofing is not acceptable for houses.
Crawl Areas:
Vapor barrier installed.
Wood debris present.
Adequate ventilation? Nail-on louvered vents are not acceptable.
Standing water or staining that indicates previous standing water.
Revised 5110 19
Interior:
Rotted floors at head of tub and bases of showers are common problems.
(One out of four houses inspected have rotted floors in these areas)
Tub enclosures sound? Rot below windows is common.
Mold around ceiling/wall corners, indicating condensation.
Electrical:
Fuse panels are not necessarily bad; however insurance companies and purchasers don't
like them.
Check for "creative wiring."
Heating:
Oil furnaces - soot around registers. Yearly servicing?
Gas furnaces - have the heat exchanger checked.
Plumbing:
Check water flow where steel water supply pipes are present.
Kitchen waste line leaking.
Construction/Consultant
• Architectural drawings acceptable to the local city or county will be necessary ONLY if
there is going to be a structural change on the property (i.e., additions to the property, a
wall removed, added or relocated).
• All work to be completed must be written up on the cost breakdown and description of
materials. These forms must be signed by both the buyers and the general contractor.
• An existing plan of the dwelling is required in all cases.
• A proposed plan is needed when structural changes are to be made to the interior of the
home, such as a wall moved, added or relocated.
• Drawings may be hand-drawn and must show the "before" and "after" of the
renovation.
+ A detailed narrative must be supplied by the borrower to cover the scope of the
renovation/remodel.
• Changes for aesthetic appeal, and elimination of obsolescence. Includes such items as
new exterior siding and new doors.
Revised 5/1 0 20
• Reconditioning or replacement of plumbing, heating, air conditioning or electrical
systems.
• Energy conservation improvements. Items such as new double pane windows and
doors, storm windows, insulation, etc.
• Major landscape work and site improvement. Includes such items as patios and
terraces.
• Improvements for easier accessibility for the handicapped.
Please note: For the FHA 203 (k) program only improvements that do not become a part of
the real property are not eligible.
Luxury items are not eligible to be financed as part of the renovation. These items include,
but are not limited to: swimming pools, exterior hot tubs, saunas and tennis courts.
Step 6: Appraisal
The "after-renovation" value is the future market value of the property after the repairs and/or
improvements are completed. This appraisal is based on the completed exhibits accepted by
the consultant/plan reviewer. The cost breakdown and description of materials are
emphasized in this evaluation.
Once all of the renovation documentation, credit verifications, and supporting documentation
is received, the loan can be submitted to underwriting. If the loan is approved, a commitment
letter is issued to notify the borrower of any conditions that must be met prior to closing the
loan.
Once all conditions of approval have been met, the loan can close. At that time the funds will
be disbursed to either pay the sales price on the property (in a purchase transaction), or
existing debt (in a refinance transaction). The remaining funds are held in an interest-bearing
escrow account that will be used to fund the draw requests throughout the renovation period.
This escrow account consists of several component parts, which include:
•The renovation escrow, which is the allotted amount shown on the draw request form
to cover all of the planned repairs.
• The contingency reserve, which is used to pay any unforeseen repairs that must be
completed for health, safety, or necessary reasons.
• Additional funds to pay for inspection fees, title update fees, plan reviewer, or
independent consultant fees.
• The mortgage payment escrow (for up to six months) if the property is not habitable so
that the property owner does not have to make mortgage payments during construction.
Revised 5/10 21
FHA STREAMLINE 203(k)
Purchase Scenario
Now that Drew and Angelina have found their new home they are facing the reality that it is not
only very difficult to save up all the additional $21,000 for the desired renovation, but far too
expensive to finance it all on credit cards. The solution is to finance them at a great low rate
and a truly affordable monthly payment. Here's how those improvements can be enjoyed
today versus years down the roadl
$253,436 $231,877