FHA 203K Closing Costs

If you’re interested in the 203k loan and would like to know what additional costs or fees are involved in comparison to other FHA or Conventional loans this may help you.

Here is an approximation of what the loan breaks down to.

Rate difference between the FHA 203K and other loans:

The interest rate is approximately a half percent higher (.5%) so whatever the market is at the time of your shopping, figure that the 203k will be about .5 % higher. (Example instead of 5% it would be 5.5%)

Additional cost differences:

If the total loan amount including improvements are equal to or less than $417,000 then calculate 1%

If the total loan amount including improvements is over $417,000 then calculate about 2%.

In addition calculate about 3.5% on the money needed for just the improvement

***These are approximations but should give you an idea of what to expect.***

Contingency Costs

A minimum 10% contingency reserve is required in the event of unexpected expenses,
A 15% to 20% contingency will be required if the utilities are turned off. With that in mind contingency reserves as well as any additional fees connected to the improvement amount have to be taken into consideration and included into the grand total. For instance the $35k limit on the Streamline 203K should be kept to $30k in actual improvements to leave the remaining balance for the contingency reserve and cost.

Recommendation to lower the money needed to close:
Keep in mind the 203k loan requires a minimum down payment based off of the sale price + the cost of improvements combined and that minimum down payment is 3.5%. If you’d like to minimize the money needed to close, you can request that the seller pay up to the allowable 6% of the sale price for all closing cost as this will lower the amount of money needed at closing.