December 28, 2010
Every home loan comes with associated fees, whether it’s an FHA mortgage or conventional home loan. Knowing the fees up front can help house hunters budget for the ones they must pay up front and understand which ones can be rolled into the amount of the loan when permitted by FHA regulations.
FHA loan fees include the loan origination fee, which includes the administrative cost of doing business with your chosen lender. There are also title search and examination fees and legal fees which must be paid.
Some sellers may agree to pay the legal fees as part of the incentive to close on the home, but such issues are handled on a case-by-case basis. There’s no requirement from the FHA as to who pays the legal fees, whether it’s the buyer or seller. The buyer is responsible for paying any legal fees associated when he or she chooses to hire a lawyer to review the contract or other documents.
They buyer is also responsible for paying appraisal fees and any fees associated with hiring a mortgage broker, if one is used. Buyers should also anticipate paying the cost of getting credit reports–it’s true that free credit reports are available for consumers, but don’t expect to use your free credit reports to prepare an FHA home loan; borrowers aren’t permitted to furnish copies of a credit report to the lender–all credit reports must come directly from each of the three major credit reporting agencies.
Discount points can bring some confusion for some first time home buyers. The very phrase, “discount points” implies some kind of price break for the borrower; this is true in the sense that purchasing discount points lowers the interest rate on the loan. The buyer can purchase any discount points offered by the lender–one percentage point lowered per discount point purchased–to get a more competitive interest rate. In some cases the seller may offer to buy discount points as an incentive to buy the home.
These are just some of the fees associated with FHA home loans. It’s important to begin saving for the cost of buying a home as early as possible to prevent financial hardships later on. While it’s true that some of the costs of getting an FHA home loan can be rolled into the loan itself, the buyer must still pay certain fees and expenses up front. Start saving for such expenses at the same time you begin preparing for the loan–many financial experts recommend at least a year’s worth of preparation for both expenses and credit repair/maintenance.
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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