April 25, 2018
FHA home loans have closing costs a borrower should plan to save and pay for. No matter if you need an FHA Home Equity Conversion Mortgage, a 203(k) rehab loan, or an FHA One Time Close construction loan, there will be closing costs to pay for.
No borrower should plan for a home loan without anticipating the closing costs. You should budget and save for these expenses as early as possible-once you know you are interested in purchasing a home, you should prepare for these costs.
HUD 4000.1 tells the lender that FHA loan rules permit closing costs; the lender “may charge and collect from Borrowers those customary and reasonable closing costs necessary to close the Mortgage. Charges may not exceed the actual costs.”
This is not a complete or exhaustive list-your expenses for an FHA home loan will vary depending on the lender and the housing market.
FHA Closing Costs Include A Lender’s Fee
The “lender’s origination fee” is an expense the lender is permitted to include as a customary charge. HUD 4000.1, the FHA loan handbook, permits this fee as long as it is “reasonable”.
FHA loan rules do not mention a dollar amount for the lender’s fee, sometimes known as an origination fee. FHA loan rules simply require these fees to be similar to those charged for similar transactions. You will need to ask your lender what the fee is for that financial institution.
An FHA Loan Minimum Down Payment Rule You Should Know
The down payment requirement for FHA home loans (3.5% of the adjusted value of the property) is sometimes misunderstood. It is very important to remember that other home loan expenses/closing costs listed here DO NOT contribute toward the down payment.
Closing costs and the down payment are separate items and your expenses such as inspection fees, appraisal fees, mortgage insurance premiums, etc. are not part of your down payment.
FHA Loan Appraisal Fees And Inspection Fees
FHA loans require FHA appraisals, which are paid for by the borrower. In some cases, the appraisal may require that corrections or repairs take place as a condition of loan approval. In such cases, there may be a follow-up inspection required to make sure the work is done to FHA minimum standards.
This “inspection” is limited and should NOT be compared to a home inspection the borrower is responsible for arranging and pay for on her own if so desired. No home should ever be purchased without a complete home inspection. Do not rely on the appraisal alone as it is not designed to help the borrower make a fully informed choice about the home.
FHA Loan Fees: Flood Zone Determination
Depending on circumstances, some borrowers may be required to pay for a flood zone determination for the property they wish to buy. This is not an expense required in all housing markets, but where it is reasonable and customary to do so, lenders often require this.
Borrowers should anticipate this expense and assume it must be paid unless the lender instructs otherwise. There may be different types of hazard determination procedures for certain risks in a housing market that do not apply in other areas-your experience may vary.
Want More Information About One-Time Close Loans?
One-Time Close Loans are available for FHA, VA and USDA Mortgages. These loans also go by the following names: 1 X Close, Single-Close Loan or OTC Loan. This type of loan allows for you to finance the purchase of the land along with the construction of the home. You can also use land that you own free and clear or has an existing mortgage.
We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted to one licensed construction lender in your area, please send responses to the questions below. All information is treated confidentially.
OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). You CANNOT act as your own general contractor (Builder) / not available in all States.
In addition, this is a partial list of the following homes/building styles that are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin or Bamboo Homes, Shipping Container Homes, Dome Homes, Bermed Earth-Sheltered Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Tiny Homes, Carriage Houses, Accessory Dwelling Units and A-Framed Homes.
Your email to info@onetimeclose.com authorizes Onetimeclose.com to share your personal information with a mortgage construction lender licensed in your area to contact you.
- Send your first and last name, e-mail address, and contact telephone number.
- Tell us the city and state of the proposed property.
- Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good – (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
- Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veteran’s, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $1,000,000 and review higher loan amounts on a case by case basis. If not an eligible veteran, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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.
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