December 14, 2010
In 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. A lender’s mortgage charge rate’ (discount points, origination and other fees) may not provide for a variation of more than two percent on its FHA mortgages within a geographic area; and any such variation must be based on actual variations in fees or costs to the lender to make the loan.”
The FHA has regulations that cover what the lender can’t charge the buyer (tax service fees, for example, can’t be charged to the borrower), and there were rules covering the loan origination fee cap on loans issued through December 31, 2009.
For those loans, the FHA placed a limit on the loan origination fee a lender could charge the borrower; according to the FHA, “For loans originated through December 31, 2009, the origination fee may not exceed one percent.”
But on FHA mortgages originated January 1, 2010 and after, the FHA cap on loan origination fees is gone. For those who purchased homes before the cap was lifted, there is some good news. According to the FHA, “The elimination of the origination fee cap for FHA standard forward mortgage programs DOES NOT apply to the FHA HECM (reverse mortgage) or 203(k) (rehabilitation) programs.”
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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