Articles Tagged With: Origination Fee

July 20, 2015

FHA Loans, Seller Concessions, and Cash To The Borrower

We recently got a question about an FHA loan situation where the seller of the home agreed to pay 3.5% of the closing costs on a transaction. According to the reader question, the “actual permitted seller concessions” were much lower. The reader asked, “Since FHA would not allow cash back”, the buyer asked the seller for the difference of the two amounts to be paid to the borrower, “outside of closing” The question the reader asks: Is this legal? FHA loans do not permit cash back to the borrower except in the form of refunds. However, HUD 4155.2 does include some guidelines for seller concessions, which are limited to six percent of the sales price. Those guidelines do permit “monetary gifts” as we’ll read in a moment. Chapter Four of | more...

January 21, 2015

FHA HECM Loan Origination Fees: What CFPB Says

By Joe Wallace

In our previous blog post, a reader asked us an important question about FHA Home Equity Conversion Mortgage (HECM) loan origination fees. Here’s that question: “Is there a cap on fees a broker can be compensated for their part on a HECM loan, and if the lender list origination fee that is clearly greater than the $6000 max, which includes the broker compensation paid by the lender. My question is is the lender in violation of the origination cap?” FHA HECM loan origination fees are indeed capped at a maximum of $6,000 for certain HECM loans above a specific dollar amount. The Consumer Financial Protection Bureau, a government finance watchdog organization, has this to say about FHA HECM loan origination fees: “An origination fee is what the lender or mortgage | more...

January 21, 2015

FHA HECM Loan Origination Fee Caps: A Reader Question

By Joe Wallace

A reader asks, “Is there a cap on fees a broker can be compensated for their part on a HECM loan, and if the lender list origination fee that is clearly greater than the $6000 max, which includes the broker compensation paid by the lender. My question is the lender in violation of the origination cap?” Without more information, it would be pure speculation as to whether a particular lender is in violation of FHA loan rules, but regardless, any borrower who suspects there may be illegal or unethical practices in association with an FHA home loan or HECM loan should contact the FHA directly by calling them at 1-800 CALL FHA. Let’s see what the FHA official site (www.FHA.gov) has to say about HECM fee caps on the page | more...

November 25, 2014

“Mandatory Obligations” For FHA HECM Loans

By Joe Wallace

The FHA made a great many changes to the Home Equity Conversion Mortgage loan (HECM) program in 2014. There have been alterations to the way funds are paid, the rules covering fixed-rate HECMs versus adjustable rate HECM loans and much more. One thing the FHA has also done is to make a list of what it calls “Mandatory Obligations” for HECM loans–basically a list of required fees and expenses that could affect the amount of money that comes to a HECM borrower from the initial disbursement. This list is rather lengthy, but knowing these expenses is very important–borrowers should know that the items on this list are required to be factored in when the lender is trying to determine how much money comes to the borrower on that initial payout | more...

April 24, 2014

FHA Loan Reader Questions: Closing Cost Caps?

By Joe Wallace

A reader asks, “Is there a cap on what borrower can pay in order to close an FHA loan? In other words, after the down payment, is borrower limited in what they can pay to close the deal?” There’s no set dollar amount limit on closing costs per se–all home loans are different–but FHA loan rules as spelled out in HUD 4155.1 do explain what expenses a borrower can be charged and what he or she is not allowed to be charged. For example, in Chapter Five, Section A, we learn: “Lenders may charge and collect from borrowers those customary and reasonable costs necessary to close the mortgage loan. Borrowers may not pay a tax service fee.” Additionally, “FHA no longer limits the origination fee to one percent of the | more...

June 21, 2011

Facts About FHA Loan Fees

By Joe Wallace

When you apply for an FHA home loan, make the commitment to buy and close the deal, there are a variety of services which must be paid for as part of the home buying process. Some fees are paid by the borrower, some by the lender, and some by the seller. Do you know what fees you’re responsible for as a borrower taking out an FHA mortgage? FHA loan fees the borrower must pay include a loan origination fee, which includes payment for the cost of doing business with your chosen lender. The buyer is also responsible for any title search and examination fees, plus legal fees where applicable. For some home sales with an FHA loan, the sellers may agree to pay the legal fees–part of an incentive to | more...

April 26, 2011

Rules Governing FHA Loan Fees

By Joe Wallace

In recent blog posts we’ve discussed the fact that the FHA does not set interest rates on the loans it insures. Forces in the marketplace already determine the state of housing market interest, for the FHA to get involved in setting rates for FHA-guaranteed loans would involve a whole new layer of effort and study to keep up with ever-changing market conditions. Instead, the FHA allows lenders and borrowers to negotiate the rates. What the FHA does do is to control the fees and charges associated with an FHA loan. FHA rules state fees and costs must be “reasonable and customary”. For example, FHA rules allow the lender to collect an origination fee. For loans through the end of 2009, the fee was limited to one percent. The one percent | more...

December 28, 2010

FHA Home Loan Fees

By Joe Wallace

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.

December 21, 2010

What is an FHA Growing Equity Mortgage?

By Joe Wallace

For every new home owner, there is a different set of needs. FHA mortgages are designed to serve a range of preferences. Some people apply for an FHA home loan looking simply for low monthly payments. Others purchase homes looking for lower interest rates so they can save money over the lifetime of the FHA loan. Still others want to purchase homes with shorter commitment times. For those who want shorter mortgage terms, the FHA Growing Equity Mortgage or GEM is an option worth looking into. GEMs are basically Graduated Payment Mortgages; they let the borrower pay off the principal faster while shortening the mortgage term by increasing the payments over time.

December 14, 2010

FHA Closing Costs and Loan Origination Fees

By Joe Wallace

n our last blog post we discussed FHA loans and interest rates. Contrary to the impression some first-time home buyers may have, the FHA and HUD do not set or regulate interest rates on FHA mortgages. The FHA doesn't "regulate" closing costs but does have requirements which state lenders may charge what is "reasonable and customary". FHA requirements on closing costs also include the following from the FHA official site" "Aggregate closing costs charged to a borrower may not violate the FHA tiered pricing rules which prohibit a lender from charging higher prices for low balance loans than the lender charges for higher balance loans."