Articles Tagged With: FHA Closing Costs

April 8, 2016

FHA Loan Questions: Paying Fees

A reader asks, “Is their costs in an FHA loan the the seller has to pay for the buyer, and if so what are those costs?” FHA loan rules in HUD 4000.1 permit “interested parties” to contribute a certain amount towards approved expenses of an FHA mortgage loan for a new purchase. The rules for these contributions are found starting on page 220, which has both a definition of the phrase, and the types of costs these parties may contribute. “Interested Parties refer to sellers, real estate agents, builders, developers or other parties with an interest in the transaction. Interested Party Contribution refers to a payment by an Interested Party, or combination of parties, toward the Borrowers origination fees, other closing costs and discount points.” FHA loan rules limit these | more...

When Is An FHA Loan Better Than A Conventional Loan?

December 31, 2015

FHA Loan Rules In HUD 4000.1 On Closing Costs, Discount Points

By Joe Wallace

FHA loan rules in HUD 4000.1 include some instructions to the lender about closing costs, discount points, down payment funds, and much more. Can a borrower use closing costs as part of his or her down payment? What does the FHA rulebook say about interest rate lock-in fees? There are many rules and regulations–borrowers and lenders alike should be familiar with the guidelines. For example, when it comes to the down payment question, FHA loan rules are clear that the down payment money is a separate and distinct thing from closing costs. Specifically, HUD 4000.1 states: “The Mortgagee is not permitted to use closing costs to help the Borrower meet the Minimum Required Investment (MRI).” So that means an FHA borrower will need to budget for both closing costs and | more...

January 8, 2015

FHA Mortgage Loan Closing Costs: Prepaid Items, Per Diem Interest

By Joe Wallace

In our last post, we answered a reader question about FHA loan closing costs. This type of question is important for borrowers to ask as the answers can help you save and prepare for the costs of getting a home loan. There are several items a borrower may be required to pay at or before the loan closes in order to finalize the transaction. Some of these items include pre-paid expenses such as per diem interest, and discount points (when the borrower chooses to pay these points). Pre-paid expenses are defined in HUD 4155.1 Chapter Five as follows: “Prepaid items are collected at closing to cover  accrued and unaccrued hazard insurance premiums  mortgage insurance premiums  taxes  per diem interest, and  other similar fees and charges.” | more...

June 10, 2014

FHA Refinance Loan Rules For Payments Before and After The New Loan

By Joe Wallace

FHA refinance loan advice includes a variety of recommendations about creditworthiness. For example, you should make sure you have 12 months of on-time payments on your credit record before you apply for a refinance loan, especially when applying for cash-out refinancing loans. But what about the timeliness of your original mortgage payments? Borrowers who have made all their payments on time and are about to refinance may wonder if, because of the timing of an FHA refinance transaction, two payments might be required in a single month. Can’t the borrower skip the final payment on the old mortgage before the new one kicks in? The rules for refinance loans found in HUD 4155.1 Chapter Three instruct the lender to make sure the borrower is current and paid up all the | more...

February 12, 2014

FHA Loan Reader Questions: Down Payments and Bankruptcy

By Joe Wallace

We’ve gotten plenty of reader questions lately on the subjects of down payments, bankruptcy, and eligibility for FHA home loans. Here’s one: “Is there any company that will finance a small condo without a down payment. Thank you” And here’s another: “My wife and I surrendered our home thru a chapter 13. The chapter 13 was a 100% repayment plan that was successfully discharged in December of 2013…We have entered into a lease option home purchase and would like a straight answer on how long of a “waiting period” we must endure before we are able to finance a home again? We also have about $80K in sweat equity against an agreed upon purchase price of $270K. What type of down payment can we expect to need?” FHA loan rules | more...

January 31, 2014

FHA Loan Occupancy Rules: A Reader Question

By Joe Wallace

A reader asks, “With a FHA Arm 5/1 or Section 251 loan, how long do I have to live in the house before I can sell it?” This may seem like a tricky question. FHA loan rules for single family home loans found in HUD 4155.1 do list occupancy requirements. According to Chapter Four: “At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to be considered owner-occupied. FHA security instruments require a borrower to establish bona fide occupancy in a home as the borrower’s principal residence within 60 days of signing the security instrument, with continued occupancy for at least one year.” But that rule says nothing about the borrower’s ability to sell the property. Borrowers are | more...

January 29, 2014

FHA No-Cash Out Refinancing Loans (With Appraisal): Basic Rules

By Joe Wallace

There are plenty of reasons to refinance a home with an FHA no-cash-out refinancing loan–taking advantage of lower interest rates is one of those good reasons, as is getting into a lower mortgage payment. The FHA offers a variety of refinancing options for single family home loans–what are the basic ground rules for an FHA no-cash-out refinancing loan? For starters, the amount that can be refinanced is, according to HUD 4155.1 Chapter Three Section B, “is the lesser of the 97.75% Loan-To-Value (LTV) factor applied to the appraised value of the property, or existing debt. The total FHA first mortgage is limited to 100% of the appraised value, including any financed upfront mortgage insurance premium (UFMIP).” Chapter Three adds that in general, the maximum mortgage cannot exceed the “statutory limit, | more...

January 24, 2014

Can FHA Home Loan Closing Costs Be Financed? A Reader Question

By Joe Wallace

A reader asks, “I have read in several places on the web that it is possible to finance your closing costs into a FHA loan. However, many of these sources are at least a couple of years old. Is this possible?” To start, let’s examine what the FHA official site has to say about FHA loans and closing costs. At www.HUD.gov on the page titled Let FHA Loans Help You, we find the following: “FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.” Some closing costs may be financed, some may be paid by the seller within the boundaries of | more...

January 17, 2014

FHA Minimum FICO Credit Score: A Reader Question

By Joe Wallace

A reader asks, “I have Bankruptcy discharged June 1 2011. I do not have lots of credit. Have small inheritance from mother. I Want to purchase small house in Cleveland, Georgia. I have joined Equifax (663), TransUnion (718) and Experian (638). When I access each one has a score different than the other credit reporting agency. How can I determine my creditworthiness?” FHA loan rules say that in general, when a FICO score is available, the lender is required to use it to help determine a borrower’s creditworthiness. The credit score alone doesn’t tell the whole story–there are other factors that play a part in whether or not an FHA loan is approved–but it does play an important role The instructions for the lender on how to process credit score | more...

January 16, 2014

FHA Loans And Energy Efficient Mortgages

By Joe Wallace

Borrowers who choose the FHA Energy Efficient Mortgage (EEM) option as part of their FHA loan can get up to $8,000 in additional funds added to the loan amount for the express purpose of adding approved energy-efficient upgrades. According to the FHA loan rules in HUD 4155.1 , Chapter Six, “Once the borrower and the property are determined eligible for FHA-insured financing, the lender, using the energy rating report and the EEM worksheet, determines the dollar amount of the cost-effective energy package that may be added to the mortgage amount. The cost of any improvement to the property that will increase the property’s energy efficiency, and that is determined to be cost effective, is eligible for financing into the mortgage.The cost that may be added to the mortgage amount is | more...