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Home Rehab Loans (Section 203k)
Interest Rates and Loan Fees

 

Interest Rates

Interest rates are not regulated and are negotiable between the borrower and the lender. The amortization of the rehab loan will be for 30 years.

Supplemental Origination Fee

When the Section 203(k) rehab mortgage involves insurance of advances, the lender may collect from the borrower a supplemental origination fee. This fee is calculated as one and one-half percent (1-1/2%) of the portion of the mortgage allocated to the rehab or $350, whichever is greater. This supplemental origination fee is collected in addition to the one percent origination fee on the total mortgage amount.

Independent Consultant Fee

A borrower can have an independent consultant prepare the required architectural exhibits. A borrower can also use a contractor to prepare the construction exhibits or prepare the exhibits themselves. The use of a consultant is not required; however, the borrower should consider using this service in order to expedite the processing of the 203(k) loan. The consultant must enter into a written agreement with the borrower that completely explains what services the consultant will perform for the borrower and the fee charged. The fee charged by the consultant can be included in the rehab mortgage. A fee of $400 is acceptable for a property with repairs less than $7,500; $500 for repairs between $7,501 and $15,000; $600 for repairs between $ 15,001 and $ 30,000; and $ 700 for repairs between $30,001 and $50,000; $800 for repairs between $50,001 and $75,000; $900 for repairs between $75,001 and $100,000; and $ 1,000 for repairs over $100,000. An additional fee of $25 can be charged for each additional unit in the property under the same FHA case number. For this fee, the consultant would inspect the property and provide all the required architectural exhibits. State licensed architect or engineer fees are not restricted by this fee schedule. The architect and engineer fees must be customary and reasonable for the type of project.

Plan Review Fee

Prior to the appraisal, a HUD-accepted plan reviewer (or fee consultant) must visit the site to ensure compliance with program requirements. The utilities must be on for this site review to take place. The fee is as follows and may not be changed without HUD Headquarters approval:

  • Initial review prior to appraisal:
    Cost of repairs / fee: <$15,000 = $100.00, >$15,001 but less than or equal to $30,000 = $150.00, >$30,001 = $200.00
  • Additional unit review (two to four units with same case number): $50.00 per unit
  • Additional review (reinspection of the same unit): $50.00. When travel distance exceeds 30 miles round trip from the reviewer's place of business, a mileage charge (established by HUD Field Office) may be applied to the above charges, including toll road and other charges where applicable.

Appraisal Fee

To process a Section 203(k) rehab mortgage, two appraisals can be performed: (1) As-is value of the property; and (2) Estimated market value of the property assuming completion of the rehab. The maximum fee which a lender may collect for these two appraisals is one and one-half times the amount permitted for a Section 203(b) proposed construction appraisal, as established by the HUD Field Office. If only one appraisal is done, the fee will be the same as a proposed construction appraisal.

Inspection Fees

These fees may be applicable during the rehab construction period and are established by the local HUD field office.

  • Fees for a maximum of five draw inspections will be allowed for inclusion in the cost of rehab. If all inspections are not required, remaining funds must be applied to reduce the mortgage principal after the Final Release Notice is issued.
  • If additional inspections are required by the lender to ensure satisfactory compliance with exhibits, the borrower or contractor will be responsible for payment; however, the lender has ultimate responsibility.

Title Update Fee

To protect the validity of the mortgage position from mechanic's liens on the property, reasonable fees charged by a title company may be included as an allowable cost of rehab. When the mortgage position is protected and is not in jeopardy, this fee may not apply. Borrowers may wish to obtain lien protection, but the fees must be paid by the borrower where such lien protection is not required to ensure the validity of the security instrument. The allowable fee should not exceed $50.00 per draw release.

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