Articles in Category: Closing Costs

April 21, 2015

FHA Loan Closing Costs

One common question asked about FHA home loans involves closing costs. Many FHA borrowers want to know how much to expect in the form of closing costs, but the simple answer to these question is, “it all depends”. Depending on what? No two housing markets are the same, and no two lenders are exactly the same either. The amount of closing costs you have to pay will vary based on these factors plus how state law may affect your transaction, possible property tax issues, how much is charged in your local area for certain services rendered, etc. Cost of services may vary, but the FHA has built in some protections for the borrower when it comes to those charges. HUD 4155.2 Chapter Six has some things to say about closing | more...

What you should know about FHA 203(h) Loans For Disaster Victims

March 20, 2015

FHA Loan Closing Costs

By Joe Wallace

A reader asks, “Is the seller of a home to a buyer that is financing with a FHA loan required to pay the buyers closing costs?” FHA loan rules do not say the seller is required to pay closing costs on behalf of the borrower; in any case the seller’s contribution to the sale whether that is in the form of paying closing costs or other incentives is limited to six percent of the sales price of the property. Here’s a quote from the HUD booklet titled, “Shopping For Your Home Loan” which includes the following under Settlement Costs: “You can negotiate which settlement costs you will pay and which will be paid by the seller. The seller may contribute a lump sum amount or may agree to pay for | more...

January 8, 2015

FHA Loan Closing Costs: A Reader Question

By Joe Wallace

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 | more...

November 12, 2014

FHA PMI Rules: A Reader Question

By Joe Wallace

A reader asks, “Does the PMI not apply to down payments of 20% and above?” The FHA has changed the rules for PMI–Private Mortgage Insurance–and as a result all FHA home loans known as “forward mortgages” with case numbers assigned on or after June 3 2013 now have different requirements than previously approved FHA mortgages. FHA Mortgagee Letter 2013-04 rescinded a set of FHA PMI rules and enacted new ones in their place. The rescinded rules include the following changes as described in FHA Mortgagee letter 2013-04; “…rescinds the automatic cancellation of the annual MIP collection announced in MLs 2000-38 and 2000-46; ….rescinds ML 2011-35, under which mortgages with terms of 15 years or less and LTVs of less than or equal to 78 percent at time of origination were exempt from the | more...

October 13, 2014

FHA HECM Loan Closing Costs: A Reader Question

By Joe Wallace

A reader asks, “What are the standard closing costs for FHA/HUD/HECM for my property with market value of 510,000.00 with 240,000.00 in debt?” FHA loan closing costs are not standardized–they vary depending on the market, the lender, the nature of the services required to underwrite and close the loan and other factors. State law can and often does affect certain types of loan transactions so there may be factors there that might not apply elsewhere. The Department of Housing and Urban Development publication “Shopping For Your Home Loan: HUD’s Settlement Cost Booklet” breaks down how things can are are charged, but only uses examples and does not come with set, across the board settlement costs–you won’t find a HUD publication that can tell you exactly how much the settlement costs | more...

October 7, 2014

FHA Loan MIP Rules: A Reader Question

By Joe Wallace

A reader asks, “We acquired FHA loan last April 2010 and refinanced it twice. Our original loan was 410k and our current bal is 383k. How can we eliminate the MIP and loan APR is 3.25%.” Last year, FHA Mortgagee Letter 2013-04 announced changes to FHA loan policy for mortgage insurance premiums. That policy was altered to require MIP payments for the maximum duration allowed by law on FHA loans. According to the FHA official site: “For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute. See 12 U.S.C. § 1709(c)(2)(B).” “For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP) less than or | more...

September 5, 2014

FHA Mortgage Rate Trends For The Week of September 2, 2014

By Joe Wallace

FHA mortgage rates can move higher or lower in any give day or week for many reasons. Those reasons can include overseas headlines (financial or political in many cases) that affect investor behavior in the USA. That was one of the factors this week when it came to rising FHA rates–there was market volatility based on the Russia/Ukraine situation, and we also saw domestic economic data that some market watchers predicted would end up competing with Russia/Ukraine developments as an influence on mortgage rates. Monday was a day off for the markets, so when the three day holiday weekend ended, Tuesday’s rate activity included upward movement in small increments that didn’t change average “best execution” rates for FHA home loans. If you were investigating rates this week, it’s true you | more...

August 15, 2014

FHA Loans: Can The Seller Pay Closing Costs?

By Joe Wallace

There are plenty of expenses related to buying a home that house hunters need to save up and/or budget for–loan fees, appraisal expenses, certain types of insurance, even moving expenses should be factored into the equation. But can the seller pay some of these costs on an FHA loan to make the sale more attractive to the borrower? This is a common question among many first-time home buyers and sellers. The answer is yes–but on a limited basis as defined in the FHA loan rulebook. FHA loan rules don’t allow sellers to contribute more than a total of six percent of the sales price of the home without there being a dollar-for-dollar reduction in the loan amount based on the contribution above that six percent. What’s more, FHA loan rules | more...

May 29, 2014

FHA Loan Fees: A Reader Question

By Joe Wallace

A reader asks, “Are there any fees associated, with a FHA loan? I was contacted after inquiring online about a loan and the representative informed me that it would be a fee of $11.00 for credit reports and a fee of $149.00 which normally would cost $350.00 for the application process and additional fees of about $49.00 until credit score was at least 620..need to know if this is legitimate before I pay these fees.” FHA loans do involve fees. A reading of HUD 4155.1 Chapter Five reveals the following: “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.” Chapter Five also states, “FHA no longer limits the origination fee to one percent | more...

April 24, 2014

FHA Loan Reader Questions: Closing Cost Caps?

By Joe Wallace

A reader asks, “Is there a cap on what borrower can pay in order to close an FHA loan? In other words, after the down payment, is borrower limited in what they can pay to close the deal?” There’s no set dollar amount limit on closing costs per se–all home loans are different–but FHA loan rules as spelled out in HUD 4155.1 do explain what expenses a borrower can be charged and what he or she is not allowed to be charged. For example, in Chapter Five, Section A, we learn: “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.” Additionally, “FHA no longer limits the origination fee to one percent of the | more...