Bank loans

Why do Banks have to raise Interest rate on a 203K contract?
  • December 13 2011 - Cleveland
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Answers (3)

1. They are riskier loans
2. Only a few lenders offer them (Supply and Demand)
3. They are more work than a non renovation loan.

What cracks me up about this is that the Frank Dodd Legislation make it illegal for a loan officer to get paid more for spending more of their time on these loans.  Fewer loan officers are willing to originate them because they do take longer and are more complicated...resulting in fewer folks competing for the loans...which leads to higher rates.

When folks that know nothing about an industry begin regulating the industry the un-intended consequences are like dominos and the folks they are trying to help are the ones that end up paying the price.
  • December 13 2011
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Exactly!
  • December 13 2011
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All lenders have risk-based pricing. The higher the risk, the higher the price. Lenders have a higher risk with rehab loans. This is the price you pay, to purchase a property below market, that requires a lot of improvements or deferred maintenance to be performed. ... Good luck.

Happy funding, Rudi 
  • December 13 2011
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