Home Mortgage Interest Rates

It has been a while since I last provided an interest rate chart on this blog. Plus I was curious to see what the graph would look like. I knew rates were lower than earlier this year, but it’s always nice to see it plotted out.

As you can see in the chart below, after peaking at about 5.60% in the first week of June this year, the 30 year fixed rate has been hovering very close to 5.00%. The 15 year mortgage is also on a similar trend but at a slightly lower rate.

Home Mortgage Interest Rates

The good news is rates remain at historically low levels. The graph above is based on an average weekly mortgage rates provided by Freddie Mac. Of course the exact rate you receive is dependent on many factors.

FHA 203(k) Financing/Rehabilitation Loans

With so many REO’s  (bank owned properties) there is no telling what state some of these homes might be in. You may fall in love with the neighbourhood, the location or some other attribute of the home and even properties in distress.  You don’t have to give up on the property just because you may not have the means to fix up the place. The FHA offers a program which allows you to wrap in the cost of fixing up a place all within one loan. It’s called the FHA 203(k) program.

Under the 203k you are allowed to purchase or refinance a property and finance the construction costs for home improvements at the same time. The loan amount is based on the projected value of the property with the work completed. The 203k program is excellent for properties that need home repairs to be liveable or for home buyers that want to give a home a makeover.

Many listing agents who represent properties in need of repair have used the 203K program to market these distressed properties. This program allows borrowers that otherwise could not purchase the property to buy it and do the necessary rehabilitation. Some contractors who are familiar with the requirements of the 203k program will put together a proposal for necessary repairs on the property listed for sale. The agent can then market the property similar to a new build. The buyer can pick the paint color, cabinets, flooring, etc.

Many buyers agents use the program to find homes for their clients at bargain prices or to make a potential home work when it needs a little help.

Many lenders have stayed away from this program because on the additional layers of risk involved and some have added additional requirements to those of FHA. From our experience the key to a smooth transaction is to have an experienced, reliable 203k consultant and contractor. Surety companies can be very helpful in this type of transaction. This program will take longer and will be more stressful than a regular FHA loan even with the most competent team. The process can be a nightmare if your team is lacking. However, if you work with the right group of professionals who are experienced then you don’t have to pass up on a REO just because it needs a little bit of love.

FHA and New Construction

AMG Note: We don’t normally do a lot of guest posts on this blog. However, when Kat Sanders contacted me and asked I felt it was worth a try. So, here is one of her first posts.

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FHA loans are some of the most sought-after loans when people are planning to buy a home, more so now because of the fiasco that happened with the sub- prime market. For the uninitiated, a Federal Housing Administration (FHA) loan is one that is administered by the federal government for people who fit in the low income bracket. The FHA does not actually give out the loans; it only insures the loans provided by private lenders.

FHA loans are perfect for those who are buying a home for the first time and don’t have too much money to offer as down payment. It also helps that monthly installments are not too high and that they do not fluctuate beyond one or two percentage points (if you go in for an adjustable rate loan).

The FHA Construction/Rehabilitation 203(k) loan is available if you want to buy an existing home and perform any renovation work on it or add to the existing building. The FHA does not insure loans for building new homes, ones where you want to buy the land and secure finance for the materials, labor and the design. However, if you are planning to build a new nursing facility or a home for the aged and infirm, the FHA 232 loan allows you to borrow money for the construction costs.  You can also take out a loan to buy an existing facility and renovate or improve it.

If you are looking for a way to build a new home with an FHA loan, you could apply for the 203(k), buy an old house, tear it down completely, and then build the house of your dreams. If not, you’re better off choosing a construction loan offered by private lenders, or you could go in for the HomeStyle loan offered through lenders who are approved by Fannie Mae.

By-line:

This article is written by Kat Sanders, who regularly blogs on the topic of construction management degrees at her blog The Fixer-Upper Blog. She welcomes your comments and questions at her email address: [email protected]

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Note:  Some hyperlinks were added for editorial reasons.

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.