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Articles in Category: Closing Costs

August 5, 2011

FHA Loans and Earnest Money Verification

By Joe Wallace

When a house hunter finds a home they want to make a serious offer on, they move out of one phase of the home buying process and into another. The shopping phase is what some view as the cost-free part of finding a home to buy with an FHA insured mortgage. Once the right property is found, that’s when the borrower starts to tap into the money he or she has set aside to deal with the costs of purchasing real estate. One of those expenses? Using earnest money–the amount an FHA borrower puts down to show a seller they are making a serious offer on the property. According to the FHA official site, earnest money “must be substantial enough to demonstrate good faith and is usually between 1-5% of | more...

 

July 25, 2011

FHA Loan Down Payments

By Joe Wallace

FHA insured loans feature down payments as low as 3.5%. Borrowers considering the purchase of a home with an FHA or conventional mortgage should anticipate this expense as they make a budget that includes the new home purchase. There are a variety of costs associated with a home loan including the down payment, closing costs, appraisal fees and other expenses. The down payment can be daunting for some borrowers–having enough time to save up for the expenses of a new home purchase is one reason most real estate experts and financial planners recommend borrowers spend at least a year preparing for a home loan. But even for those who take the time to plan and save, the down payment requirement may be more than they can afford. Is there any | more...

 

July 14, 2011

FHA Loans, Gift Funds and Inducements to Purchase

By Joe Wallace

When a borrower applies for an FHA home loan, a down payment is required for all transactions. Unlike VA home loans, FHA mortgages do not have a zero-money-down option. Some buyers may struggle to come up with a down payment on the FHA mortgage, which is why the rules allow borrowers to accept funds from outside sources to help pay for up-front expenses like down payments and closing costs as permitted by FHA regulations. But the source of that income determines whether the money is considered a bona fide gift, or if it is considered an “inducement to purchase” which affects the amount of the FHA mortgage loan. Gift funds that come from anyone with “an interest in the sale of the property” can be considered inducements to purchase, and | more...

 

June 23, 2011

FHA Loan Down Payments

By Joe Wallace

The down payment issue is one that brings many would-be conventional borrowers to an FHA lender. After seeing what some conventional loans require for a down payment, the FHA minimum 3.5% is a definite advantage to a first-time home buyer. But when a borrower is doing research on FHA loans versus conventional equivalents, sometimes the details can be a bit confusing. One area some have trouble understanding (at first) is the difference between the required 3.5% FHA loan down payment for a typical home purchase and the $100 down payment required on some HUD home purchases. A HUD home purchase is not the same as taking out an FHA mortgage in the usual way. HUD homes are properties owned by the Department of Housing and Urban Development–homes that have been | more...

 

June 21, 2011

Facts About FHA Loan Fees

By Joe Wallace

When you apply for an FHA home loan, make the commitment to buy and close the deal, there are a variety of services which must be paid for as part of the home buying process. Some fees are paid by the borrower, some by the lender, and some by the seller. Do you know what fees you’re responsible for as a borrower taking out an FHA mortgage? FHA loan fees the borrower must pay include a loan origination fee, which includes payment for the cost of doing business with your chosen lender. The buyer is also responsible for any title search and examination fees, plus legal fees where applicable. For some home sales with an FHA loan, the sellers may agree to pay the legal fees–part of an incentive to | more...

 

June 14, 2011

FHA Loans: Seller Contributions Vs. Inducements To Purchase

By Joe Wallace

In a tough housing market, house sellers often must include incentives to make their property more attractive to a borrower. In other words, the seller isn’t just putting the home up for sale, there are a few bonuses thrown into the deal such as helping with the cost of pre-paid expenses, paying discount points or other things. Some sellers will throw in some appliances as an incentive, others might offer to furnish a new large screen television, etc. When it comes to FHA loans, there are limits on how much and how far such incentives can go. The seller is not forbidden to offer any incentives, but there’s a difference between a contribution and what the FHA considers “inducements to purchase”. An inducement to purchase, while not illegal, does result | more...

 

April 26, 2011

Rules Governing FHA Loan Fees

By Joe Wallace

In recent blog posts we’ve discussed the fact that the FHA does not set interest rates on the loans it insures. Forces in the marketplace already determine the state of housing market interest, for the FHA to get involved in setting rates for FHA-guaranteed loans would involve a whole new layer of effort and study to keep up with ever-changing market conditions. Instead, the FHA allows lenders and borrowers to negotiate the rates. What the FHA does do is to control the fees and charges associated with an FHA loan. FHA rules state fees and costs must be “reasonable and customary”. For example, FHA rules allow the lender to collect an origination fee. For loans through the end of 2009, the fee was limited to one percent. The one percent | more...

 

April 25, 2011

FHA Loans: What Costs Can the Seller Pay for the Buyer?

By Joe Wallace

Negotiating isn’t easy, no matter which side of the table you’re sitting on. The buyer wants to get the best deal for money spent, but doesn’t want to make an offer that is too low for fear of scaring off the seller. From the seller’s point of view, getting the most out of a major investment like a house is crucial, but ask too much and the buyer may look elsewhere. When it comes to buying a home with a FHA guaranteed mortgage, the FHA loan program has some options buyers and sellers alike should consider to make the purchase more attractive. In the course of buying a home with a FHA-guaranteed mortgage, buyers and sellers can negotiate a sales price, but what if that price is higher than the | more...

 

February 23, 2011

FHA Loan Down Payments: Who Can Pay?

By Joe Wallace

In our last blog post, we discussed FHA loan down payment amounts. The FHA has strict rules about not only the amount of the down payment, but also the source of that money. According to the FHA rulebook, down payments must be made by the buyer. The seller is allowed to offer concessions such as paying closing costs or other expenses related to selling the home, but the seller is prohibited from contributing a down payment.