July 3, 2013
As with many other aspects of the FHA home loan process, there are rules and regulations that cover broker and real estate agent fees. Those rules are spelled out in Chapter Five of HUD 4155.1. In a section titled “Settlement Requirements Needed To Close” we find detailed rules on how such fees can be issued and paid.
For example, FHA loan rules require real estate broker fees to be included in the HUD-1 settlement statement. The specific rule says, “If a borrower is represented by a real estate broker and must pay any fee directly to the broker, that expense must
• be included in the total of the borrower’s settlement requirements, and
• appear on the HUD-1 Settlement Statement.”
The rules are different when the seller is paying a broker fee. The rules in this area are designed in part to protect the borrower from having his or her FHA loan amount reduced as a result of the broker fee being considered an “inducement to purchase”. In the eyes of the FHA it is NOT an inducement to purchase to have the seller pay a broker fee. FHA loan rules state:
“If the seller pays the broker fee as part of the sales commission, it is not considered an inducement to purchase, or part of the seller contributions limitation, as long as the seller is paying only the normal sales commission for that market.” The FHA is quick to add, “Any additional seller-paid commission to the broker is considered an inducement to purchase.”
To determine if the seller paid a buyer-broker fee( in addition to the normal sales commission) FHA loan rules say the lender, “must obtain a copy of the original listing agreement, and compare it with the HUD-1 Settlement Statement.”
When it’s time to close the deal, your lender will include broker fees in the total cash amount required to close the deal. According to Chapter Five, “The lender should include mortgage broker fees in the total of the borrower’s cash settlement requirements and on the HUD-1 Settlement Statement, if he/she pays a fee directly to a mortgage broker. This requirement applies only when the borrower independently engages a mortgage broker exclusively to seek financing, and pays the broker directly. The mortgage broker cannot be the same as the originating lender.”
If you need help navigating these fees, speak with your loan officer or contact the FHA for assistance.
Do you have questions about FHA home loans or refinance loans? Ask us in the comments section.
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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