203K or FHA Loan Creative Financing

[Steve Miklashevskiy]

This question is for the investors and the real estate agents. I work as a real estate agent in New Jersey, covering Bergen and Hudson County. I have a client who has been a special Ed teacher in Little Ferry for the past 23 years, she is looking only in Little Ferry and wants to be within a walking distance from the school. We found a perfect house for her, two blocks away from school. It's bank owned. My client cannot approved for a conventional loans (high debt-to-income ratio), so I submitted our offer with an FHA loan. The bank rejected it as they don't want to deal with FHA loans. The bank will only accept cash offers or 203K construction loans. We re-submitted our offer with a 203K loan. 203k has a significantly higher interest rate (3.8%) than an FHA loan (3.1%), which puts my client beyond her monthly payment comfort level. There is really nothing to remodel, so we are only applying with a 203k to win the bid. The lender is suggesting to switch back to FHA loan once the offer gets accepted to assure the lower. Are there any other options we can explore? If anyone has dealt with similar situations, I would really love to hear from you