Many borrowers and real estate agents have a fear that the closing costs will be too high with a 203k loan.
While there may be extra attention and service work necessary, the fact is that a 203k loan is one of the least expensive ways to renovate a home.
An experienced Rehab Loan Officer will be able to provide a complete accounting of costs and fees, as well as the dollar amount you will need to close your FHA 203k transaction.
FHA 203k Loan Origination Fee
According to the Federal Reserve Board’s mortgage compensation rule, a loan originator may not receive compensation that is based on the interest rate or other loan terms. This will prevent loan originators from increasing their own compensation by raising the consumers’ loan costs, such as by increasing the interest rate or points.
Depending on the mortgage company’s government regulated compensation plan, a typical origination fee may range from 1-2% of the total loan amount.
A key point of this new FED rule is that the mortgage company has to charge every borrower the exact same lender related fees, for every transaction, regardless of the scenario, interest rate or “relationship” they have with their client.
One of the major consumer benefits of this mortgage compensation law is that it relieves any anxiety that a borrower may feel in thinking that they need to shop around or negotiate for a better deal.
Basically, now a borrower can spend their time pre-qualifying a mortgage company based on their experience and service vs. closing costs and rates.
***The services presented here may or may not be required for your mortgage, but the list will give you an overview of various costs involved in a typical 203k loan.
If the borrower uses or is required to use a HUD Consultant, the borrower and the Consultant must enter into a written agreement that completely explains services the consultant will perform for the borrower and the fee charged.
Prior to the appraisal, a HUD-accepted fee consultant must visit the site to ensure compliance with program requirements.
The lender may charge a borrower no more than the actual amount the lender pays to have an appraisal done. Costs vary by area and property, and the fee may be either an upfront charge or included in the closing costs.
Fees for a maximum of five draw inspections will be allowed.
Title Update Fee
To protect the mortgage from mechanic’s liens filed by contractors working on the property, reasonable title company fees may be included as an allowable cost, not to exceed $50.00 per draw release.
Did You Know?
A rehab loan can be used for a purchase or refinance, and you do not have to be a first-time homebuyer to use it. Contact Us today at (888) 450-9639 to see how a 203(k) can increase the value of your property.