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.
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
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information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
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government agencies or with an attorney, particularly as it relates
to your individual circumstances. Your use of this website indicates
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