Articles Tagged With: Origination Fee

May 8, 2017

FHA Loan Fees: A Reader Question

A reader asked us a question in the comments section recently about FHA loan fees. “What is the total that lender can charge on an FHA loan?” Unfortunately there is no single answer to this question. FHA loans, and all mortgage loans, have costs that will vary depending on the lender, the transaction, whether or not sellers agree to pay some of the closing costs or other expenses. etc. Even the FHA loan funding fee, which is a standard part of all this, is based on a percentage of the mortgage amount. That amount naturally varies depending on the transaction. FHA loan rules in HUD 4000.1 instruct the lender: “The Mortgagee or sponsored TPO may charge a reasonable origination fee. The Mortgagee or sponsored TPO may charge and collect from | more...

April 10, 2017

Seller Contributions on FHA Loans

By Joe Wallace

A reader asks a question about seller contributions on an FHA mortgage loan. “What is included in seller contributions with a max of 6%?” The question refers to something informally known as the “six percent rule” on FHA mortgages, which limits the contributions of an “interested party” to six percent of the sale price of the home. This rule is found on page 232 of HUD 4000.1, which defines both interested parties and their contributions to the sale as follows: “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.” What are the FHA loan | more...

August 2, 2016

FHA Loan Questions About Seller Contributions

By Joe Wallace

A reader asks, “What extra expenses does a seller pay for a FHA offer compared to a conventional offer when selling their home?” Seller contributions and their limits are covered in HUD 4000.1. It’s impossible to speculate what the differences might be between an FHA mortgage and a conventional mortgage as loan terms may vary from lender to lender. However, FHA loan rules are clear on this subject in terms of what is permitted and what is not. Seller contributions are known as “interested party contributions” in HUD 4000.1. These must be negotiated between borrower and seller, but the agreed-upon contributions must meet FHA standards. FHA loan rules are quite clear-there is a cap on the value of seller concessions. Page 220 of HUD 4000.1 states: “Interested Parties may contribute | more...

July 18, 2016

FHA Loan Questions: Down Payment Assistance From The Seller?

By Joe Wallace

A reader asks, “Can the buyer use seller assist for the down payment and closing costs? If yes, what is the limit?” This is a more common question than it may seem at first-sellers can and often do contribute toward the closing costs of an FHA loan, but the FHA loan rulebook definitely has some things to say about how much and what kinds of contributions a seller may make. FHA loan rules governing these contributions are found on page 220 of HUD 4000.1 and cover more than just the seller’s assistance. Any financial help toward the closing costs coming from what the FHA terms “interested parties” is governed by these rules. To begin with, no one with a financial stake in the outcome of the sale of the property | more...

April 8, 2016

FHA Loan Questions: Paying Fees

By Joe Wallace

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...

February 2, 2016

FHA Loan Rules In HUD 4000.1: Inducements To Purchase (Part 2)

By Joe Wallace

In our last blog post, we discussed FHA loan rules found in HUD 4000.1 on inducements to purchase and what happens if a seller or other interested third party contributes more toward closing costs or other allowed expenses than is allowed by FHA mortgage loan rules. According to HUD 4000.1, “Inducements to Purchase refer to certain expenses paid by the seller and/or another Interested Party on behalf of the Borrower and result in a dollar-for-dollar reduction to the purchase price when computing the Adjusted Value of the Property before applying the appropriate Loan-to-Value (LTV) percentage.” This information is helpful–but what constitutes an inducement to purchase? HUD 4000.1 lists them–they include but are NOT limited to the following: –contributions exceeding 6 percent of the purchase price; –contributions exceeding the origination fees, | more...

February 1, 2016

FHA Mortgage Loan Rules In HUD 4000.1: Inducements To Purchase

By Joe Wallace

There are many rules for FHA home loans that govern what buyers and sellers can and cannot do. For example, the borrower must make a minimum down payment, and the source funds from that down payment cannot come from credit card cash advances or payday loans. But there are rules for the seller (and interested third parties) as well. Did you know FHA loan rules govern what a seller can and cannot contribute towards the purchase of the property? In some cases there are contributions that are permitted but only within certain limits. From HUD 4000.1, we learn the following: “Interested Parties may contribute up to 6 percent of the sales price toward the Borrowers origination fees, other closing costs and discount points. The 6 percent limit also includes: –Interested | 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...

September 16, 2015

FHA Rehab Loans: The Rules For 203(k)

By Joe Wallace

In a recent blog post we discussed the basics of the FHA 203(k) Rehab loan. This is a type of FHA loan that allows borrowers to repair a property being purchased with an FHA mortgage or to repair an existing home that was purchased previously. According to the FHA official site, the home to be rehabbed with an FHA 203(k) must be at least one year old. “A portion of the loan proceeds is used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed. The cost of the rehabilitation must be at least $5,000, but the total value of the property must still fall within the FHA mortgage limit | more...

July 27, 2015

FHA Loan Closing Costs and Down Payment

By Joe Wallace

A recent reader question in our comments section asked about whether closing costs are including in the FHA minimum 3.5% down payment. Is it true that an FHA loan down payment amount may include closing costs? To fully understand this issue, it’s good to know what can be included in closing costs for your FHA home loan. Closing costs include (but are not limited to) the following: Lender’s origination fee Deposit verification fees Attorney’s fees Appraisal fees and compliance inspection fees The participating lender’s origination fee Any title insurance or title examination Property surveys Credit report fees Certification fees Note that these fees do not have anything to do with the sales price or appraised value of the home. FHA loan rules say that the loan amount for an FHA | more...