FHA 203K Loans – Rates and Costs
Most mortgage conversations start with one question, what is my interest rate? It’s an important question for any potential home-buyer no doubt.
However, when it comes to specialty loan products like the 203K, HomePath Renovation, USDA Rural Home Loans or Construction Loans you need to place as much emphasis on mortgage lender expertise as you do on rate and cost.
The current mortgage environment is difficult, guidelines change daily, rates move constantly and nearly 30% of all mortgage loans that go into underwriting do not close. You heard that right, 3 in 10 potential home-buyers have their mortgage loan denied.
You paid for a home inspection, you put down earnest money, you paid for the appraisal and you did it all upfront. If you don’t close your hard earned money is wasted.
Why are so many loans denied? Sometimes it’s borrower misrepresentation, sometimes it appraised value, but mostly it’s lack of guideline knowledge and mortgage lender incompetence. Hiring an expert is more important than ever in this mortgage market. Paying an 1/8th higher in rate is irrelevant if your loan never closes.
How Are 203K Rates Different Than Traditional Mortgage Loans?
203K buyers can expect to pay about .5% more on rate than a traditional FHA 203B loan. From a mortgage lender perspective, FHA 203K loans carry more risk. Anytime you have increased risk lenders offset the risk with a higher interest rate. Mortgage 101.
However, just because you are paying a little more on rate doesn’t mean that you’ll have a more expensive mortgage. In most cases you’ll get a lot more house for less despite the slightly higher rate. Don’t think that makes sense? Read on!
Traditional FHA 203B loans have very strict property condition guidelines. If the property isn’t move in ready than it isn’t usually eligible for a regular FHA purchase loan. Why does that matter?
Foreclosures, short sales and other distressed properties that are not eligible for regular FHA 203B loans have a drastically reduced buyer pool because the majority of lenders don’t offer or don’t understand 203K financing.
Fewer buyers = reduced price. Fixer-uppers are normally available at 20 – 40% less than move-in ready homes. That means you can get a whole lot more house for you money if you are looking for 203K and HomePath Renovation only properties. The benefits of going renovation only on your home search?
- Pay MUCH Less for the Home
- Get to CHOOSE Your Own Renovation Finishes
- Greatly Increase the Pool of Potential Homes
- Finance GREEN and Energy Efficient Improvements
- Buy In the Neighborhood You Want