Mortgage Rates On FHA 203k Loans Versus Traditional Mortgages

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This BLOG On Mortgage Rates On FHA 203k Loans Versus Traditional Mortgages Was PUBLISHED On July 1st, 2020

Mortgage Rates On FHA 203k Loans Versus Traditional Mortgages

FHA 203k Loans is an acquisition and construction/renovation loan all combined in one loan. This type of loan is where a home buyer can purchase a fixer-upper or unhabitable home that is in need of rehab with a 3.5% down payment on the after improved value.

  • A home buyer can pretty do any type of rehab with an FHA 203k Loan
  • There are two types of FHA 203k Renovation Loans
  • The first and most popular FHA 203k Loan program is the FHA 203k Streamline Loan which limits the construction loan amount to $35,000

In this article, we will discuss and cover Rates On FHA 203k Loans Versus Traditional Mortgages.

FHA 203k Streamline Scope Of Work Guidelines

Homeowners can do any type of repairs with an FHA 203k Streamline loan such as the following:

  • kitchen remodeling
  • bathroom remodeling
  • basement remodeling
  • attic remodeling
  • floors
  • windows
  • roofing
  • appliances
  • furnace systems
  • air conditioning systems
  • painting
  • other types of remodeling

However, homeowners cannot do any structural changes and/or modifications to the home. They cannot do any types of room additions with FHA 203k Streamline Mortgages.

HUD Standard Full FHA 203k Renovation Loans

The second type of FHA 203k Loan is the full FHA 203k Loan.

  • Full 203k Mortgages does not have maximum construction budget amount
  • The maximum loan amount is the FHA Loan Limit for the particular county the home is located
  • Homeowners can do any type of construction including structural changes to the home as well as room additions
  • Mortgage rates on FHA 203k Loans are higher than standard FHA Loans due to the layered risk factor
  • The higher the risk, the higher the mortgage interest rates

203k’s are considered riskier loans by mortgage lenders.

What Types Of Properties Qualify For FHA 203k Loans

What Types Of Properties Qualify For FHA 203k Loans

Only owner occupant home buyers can qualify for FHA 203k Loans.

  • Second-home buyers and investment home buyers cannot qualify for 203k Loans
  • Any one to four-unit residential property can qualify for FHA 203k Rehab Loans including condominiums and townhomes
  • Manufactured homes on a solid concrete foundation can qualify 
  • Mortgage rates for two to four-unit properties are higher than rates on single-family homes due to the layered risk factor
  • Multi-unit properties are classified as higher risk investments by the lender
  • Mortgage rates on 203k Loans that are 2 to 4 unit properties are higher
  • Condominium mortgage rates on FHA 203k Loans are higher than single-family homes

This because condominiums are classified as higher risk properties than single-family homes.

How Much Higher Are Mortgage Rates On FHA 203k Loans?

Mortgage rates on FHA 203k Loans are higher than standard FHA Loans.

  • This is because lenders view buying a fixer-upper as a higher risk than a home that does not need any repairs
  • Mortgage rates on FHA 203k Loans on two to four-unit properties are yet higher than mortgage rates on FHA 203k Loans that are used for single-family homes
  • Two to four-unit properties are classified as higher risk than single-family homes
  • Condominiums are also viewed as higher risk than single-family homes

Mortgage rates on FHA 203k Loans are normally 0.50% to 1.00% higher than standard FHA Loans.

Qualification Requirements For FHA 203k Loans

A home buyer or homeowner needing refinance can qualify for an FHA 203k Loan with a 580 credit score and a 3.5% down payment.

  • Again, mortgage rates on FHA 203k Loans are higher than standard FHA Loans
  • So it is best-recommended borrowers get their credit scores maximized before starting the FHA 203k Loan Program

Homebuyers who need an FHA 203k Mortgage Lender with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

About The Author

Who is Mike Gracz

Michael Gracz is a contributing writer for Gustan Cho Associates Mortgage News and a senior mortgage banker for Gustan Cho Associates. GCA Mortgage Group has a national reputation of not having any overlays on government and conventional loans. The team at Gustan Cho Associates are experts in originating and funding FHA 203k Renovation Loans and has zero overlays and just go off HUD 4000.1 FHA Handbook Guidelines. Homebuyers who need to qualify for FHA 203k Renovation Loans with a direct lender with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text for faster response. Or email us at gcho@gustancho.com.

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