203k Loan Options

Pic credit to Vichie 81

The 203k loan has two options: The 203k Streamline loan and the 203k Standard loan.

203k Loans Are Renovation Financing FHA Loans

Both loans are part of the FHA loan family, so FHA underwriting rules and guidelines are used which also means the these loans are available to home buyers with a minimum 3.5% down payment.  The 203k Streamline and 203k Standard loan are also available for 203k refinance purposes.  The maximum dollar amount available for repairs on the 203k refinance is different than the dollar amount for home purchases.  I can fill you in on the details on this, just give me a call or drop me an email. Click here to send me an email and describe your loan and property situation.

Make Sure the Lender Does Both Types of 203k Loans

It’s always a good idea to make sure before selecting a 203k lender that the lender can do both the 203k Streamline as well as the 203k Standard.  Being that as of August of 2011 the maximum repair amount allotted for the 203k Streamline is $35,000, many prospective homeowners bump up against the ceiling of the $35,000 and if a certain part of the project goes over budget or if the appraiser adds a health and safety issue that must be fixed that you didn’t have included in your $35,000, you may need to flip the loan from the 203k Streamline to the 203k Standard to cover all the work and to bump your repair allotment.

203k Loan Rates and Fees

The difference between a regular FHA loan interest rate and the 203k Streamline loan interest rate varies from lender to lender but typically it’s about.25%- .50% higher for the 203k Streamline so it won’t break the bank.  Fees for the 203k Streamline will also vary, but depending on how you structure the loan the fees may be $500-$750 higher than the normal FHA loan.  The Standard 203k loan is much more involved (with the additional construction) than the 203k Streamline therefore it’s fees are $1500-$2000 higher than the normal FHA loan and interest rates are typically 1% – 1.5% higher than the normal FHA loan, however after 6 monthly payments have been made you can apply for a no or low cost FHA Streamline to convert the 203k Standard to a normal FHA loan to lower the rate.

So you could hypothetically apply for a 203k loan where you build in fees into the rate, which produces a higher interest rate. This would mean less upfront monies out of pocket when buying the home.  Make 12 payments on the loan, and than apply for a Streamline loan to get the prevailing lower rate and if and roll the fees for the new 2o3k refinance loan into the loan.

If you have any other questions in regards to either of these programs, please don’t hesitate to call me at 805-276-1942, click here to let me know your 203k scenario, or email me at kwaltonucf@verizon.net your loan scenario.