February 21, 2014
A reader asks, “What portion FHA’S closing costs that the buyer cannot pay that must be paid by the seller?”
A look at HUD 4155.1 revealed no language that included a requirement for the seller to pay closing costs on behalf of the borrower for an FHA home loan. There IS language in FHA loan rules saying that the borrower cannot be charged certain fees or expenses such as the lender’s legal fees for retaining a lawyer.
FHA loan rules in Chapter Five, Section A of HUD 4155.1 also mention the following:
“If the seller pays the broker fee as part of the sales commission, it is not considered an inducement to purchase, or part of the seller contributions limitation, as long as the seller is paying only the normal sales commission for that market. Any additional seller-paid commission to the broker is considered an inducement to purchase.”
The seller is PERMITTED, but not REQUIRED to contribute the following:
- third party payment for permanent and temporary interest rate buydowns, and other payment supplements
- payments of mortgage interest for fixed rate mortgages
- mortgage payment protection insurance, and
- payment of the upfront mortgage insurance premium (UFMIP).
These items are known as seller concessions and are subject to FHA loan rules, lender requirements, and an agreement between the borrower and the seller. These concessions would need to be negotiated between the borrower and the seller–there’s no mandatory inclusion of seller concessions in an FHA mortgage loan.
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 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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