January 8, 2015
A reader asks, “What are the required closing costs for the buyer and seller?”
The answers to this question depend on what the buyer and seller have agreed to. Sellers are limited with respect to contributing goods, costs or related contributions to six percent of the sales price or appraised value of the property (whichever is lower).
Closing costs may vary depending on the transaction, the housing market, the lender, etc. There is no fixed dollar amount on closing costs that can be quoted in a general way, but we can examine the FHA loan rulebook to see what is required by FHA regulations.
This information is found in HUD 4155.1 Chapter Five, which states:
“Lenders may charge and collect from borrowers those customary and reasonable costs necessary to close the mortgage loan. Borrowers may not pay a tax service fee. FHA no longer limits the origination fee to one percent of the mortgage amount for its standard mortgage insurance programs. However, both the Home Equity Conversion Mortgage (HECM) and Section 203(k) Rehabilitation Mortgage Insurance programs retain their statutory origination fee caps.”
Furthermore, FHA loan rules state:
“For each transaction, the lender must provide the initial Good Faith Estimate (GFE), all revised Good Faith Estimates and a final HUD-1 Settlement Statement, consistent with the Real Estate Settlement Procedures Act (RESPA), to determine the cash required to close the mortgage transaction.” The GFE is considered the official documentation of all closing costs and other expenses needed to complete the transaction.
“In addition to the minimum downpayment requirement described in HUD 4155.1 5.B.1.a, additional borrower expenses must be included in the total amount of cash that the borrower must provide at mortgage settlement. Such additional expenses include, but are not limited to
closing costs, such as those customary and reasonable costs necessary to close the mortgage loan
prepaid items
discount points
non-realty or personal property
upfront mortgage insurance premium (UFMIP) amounts
repairs and improvements
real estate broker fees
mortgage broker fees
premium pricing on FHA-insured mortgages, and
yield spread premiums.”
For more specific information on closing costs, it’s best to discuss the transaction with your loan officer and/or contact the FHA directly by calling them at 1-800 CALL FHA.
Do you have questions about FHA home loans? Ask us in the comments section. You can also follow us on Facebook.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: