June 8, 2012
FHA loan rules include guidelines on the settlement fees required to close the loan so the buyer can take possession of the property.
For example, FHA loan rules state, “Lenders may charge and collect from borrowers those customary and reasonable costs necessary to close the mortgage loan”, but the very next line in those rules add, “Borrowers may not pay a tax service fee.”
Borrowers who want to know the fees they are required to pay should take note; FHA loan rules say the lender is required to include “the sum of all fees and charges from origination-related charges in Box 1 on page 2 of the Good Faith Estimate (GFE).”
What can those fees include? According to HUD 4155.1 Chapter 5 Section A “In addition to the minimum downpayment requirement described in HUD 4155.1 5.B.1.a, additional borrower expenses must be included in the total amount of cash that the borrower must provide at mortgage settlement.”
The FHA has a list of those expenses, which includes–but is not limited to–the following items:
closing costs, such as those customary and reasonable costs necessary to close the mortgage loan
upfront mortgage insurance premium amounts
prepaid items
discount points
non-realty or personal property
real estate broker fees
mortgage broker fees
repairs and improvements
premium pricing on FHA-insured mortgages
yield spread premiums
As you can see, the expenses and fees list can be lengthy–it is a good idea to begin budgeting and saving for these expenses far in advance of a home purchase. Home loan experts advise the planning and saving phase of your home loan preparation to begin at least one year in advance of the time you’re ready to start house hunting.
Borrowers who need advice on how to financially prepare for such expenses should consider the services of an FHA-approved pre-purchase counselor. You can get a referral to these counselors directly from the FHA.
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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