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Mortgage Interest Rates for FHA 203k Loans

Rehab property buyers should watch out for the interest rates on the FHA 203k loan program on a regular basis in order to lock-in the lowest and the best possible. Like other mortgage loan interest rates, 203k rates also fluctuate daily based on the market conditions. Unless one engages the services of a lender that regularly monitors the 203k loan rates, it can become very difficult for home buyers to keep track of the current FHA rates.

Conventional Mortgage Rates vs. 203k Interest Rates

Whether a home loan is funded through a conventional mortgage or a FHA 203k program, the majority of the factors that affect the interest rates are, more or less, the same. The loan underwriting involved in a 203(K) program is mostly identical to the steps followed in the financing of a regular home loan, except for a few differences. The interest on a 203k loan program depends on the type of the loan program chosen by the borrower. Streamline 203(K) program and Standard 203(K) program have different lending guidelines, which ultimately influence the rates charged on the respective loan programs.

The 203k mortgage rates also vary from lender to lender depending on the credit score, employment history, income, assets, property type and loan amount. The more favorable the interest rate charged on a loan, the tighter the loan program’s requirements.

203(k) Streamline Loan Rates

The 203K streamline program’s rates are a bit lesser than the interest rates charged on a standard 203k loan. The FHA 203k streamline mortgage is ideally suited for projects where the rehabilitation expenses are less than $35,000 with no structural changes in the proposed work. A number of cosmetic changes, roof repair and new appliances are accommodated under the streamline 203k program’s guidelines. Due to the simple and straightforward nature of the loan, the interest rates on a 203k streamline rehab loan are a little bit more favorable.

The other version of 203(K) loan allows for much higher expenses and also for the undertaking up of comprehensive rehab work. According to the FHA guidelines, a 203k approved consultant is required for a standard 203(K) loan. The complexity and the higher number of steps involved in the approval process contribute towards the higher loan rates on 203k loans.

Current 203k Loan Rates & Programs

203K interest rate charged on a residential property rehab loan by a FHA lender is slightly higher the rate charged on a regular FHA loan. The rate is usually in the range of .25% to .50% higher than the comparable FHA loan without the involvement of renovation funds. The rates fluctuate with the increased margin in parallel with the corresponding FHA loan’s interest rates.

The slightly higher 203K interest rates charged are justified due to the extra risk and procedures involved. The 203k rates are much less when compared to the hard money lenders who finance residential rehab properties. The flexibility that is allowed by the 203(K) loan guidelines allows a residential property owner or buyer to renovate or upgrade their primary residence at highly affordable interest rates.