December 19, 2013
A reader asks, “My husband and I are trying to buy a home. We have the 3-3.5% down required, I have $1500.00 for the realtor earnest money, the appraisal and the inspection. Is that all the money I will need up front. We are asking seller to pay closing. Since we can ask them that 6% goes to pay to closing. SO, if seller pays closing. I have money for the down payment, earnest money, appraisal and inspection- that will be all I need, correct?”
It’s difficult to answer a question like this because every loan is unique. Some home loan purchases may require a flood zone determination, there may be certain legal fees if the borrower has paid for certain title services, state laws and tax code may apply, etc. There are a lot of factors that go into the final expenses of any home loan.
One example of this? Compliance inspections. An FHA appraiser is required to review the home to be purchased with an FHA mortgage loan. If the home “passes” the appraisal, no corrections or improvements may be required. But some appraisals turn up issues that need correcting, and these corrections are often required as a condition of loan approval.
What does that mean when it comes to the expenses associated with the FHA mortgage?
When these corrections are made, the borrower is often required to pay for an additional “compliance inspection” to follow up. The compliance inspection tells the FHA and lender that the repairs or alterations required by the appraiser actually did occur and to the satisfaction of the appraiser. Compliance inspections are paid for by the borrower the same as the original appraisal. It’s payment due for a service rendered.
These inspections are not part of every single FHA home loan transaction, but whether or not they may occur in the case of our reader question is unknown. It’s best to anticipate such expenses and hope they aren’t needed. FHA loan questions like these often don’t have a one-size-fits-all solution, but knowing what could be required can help a borrower budget for these costs accordingly.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at www.FHA.com, a private company and not a government website.
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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