July 13, 2015
There are many expenses and services associated with an FHA home loan. Some borrowers experience confusion over some of these, not knowing which are optional, which are mandatory, and what to do about the expenses. Mandatory services include appraisal fees, flood zone determinations (where appropriate), and credit report fees. Optional services include home inspections (strongly recommended) and brokers.
When it’s time to pay credit report fees, the borrower may not be charged more than the actual cost of these services; appraisal fees are required no matter what the outcome of the appraisal. These are two examples of FHA loan fees for services rendered–the service must be paid for no matter what the results of those services might be.
With respect to brokers, some might assume that they need a broker or are required to use one, but a borrower is free to hire one or not–you can always buy a home on your own without the help of a broker–you can apply for a loan directly from a participating lender. If you do choose to use a broker, that expense would be paid for you, or the seller depending on circumstances. Sellers are permitted to pay for a broker within certain FHA guidelines related to seller contributions.
To use or not use a broker may be the borrower’s choice depending on circumstances. But another service associated with home loans–the escrow account–may not be optional, depending.
FHA loan rules do not demand the use of an escrow account, but the lender is free to require one–borrowers should not confuse the lack of an FHA requirement for escrow accounts for a prohibition against the lender requiring it. FHA loan rules clearly state that the lender may require the use of an escrow account, which is helpful for property tax issues and other details that may be relevant depending on the type of home loan.
Escrow accounts may not be required at all financial institutions, but where they are the borrower should expect to meet the lender’s requirements in this area as a condition of loan approval.
Do you have questions about FHA home loans? Ask us in the comments section.
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: