A reader asks, “Are there any fees associated, with a FHA loan? I was contacted after inquiring online about a loan and the representative informed me that it would be a fee of $11.00 for credit reports and a fee of $149.00 which normally would cost $350.00 for the application process and additional fees of about $49.00 until credit score was at least 620..need to know if this is legitimate before I pay these fees.”
FHA loans do involve fees. A reading of HUD 4155.1 Chapter Five reveals the following:
“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.”
Chapter Five also states, “FHA no longer limits the origination fee to one percent of the mortgage amount for its standard mortgage insurance programs.”
What kinds of fees are common with FHA loans? It depends on the lender, as fees may vary from financial institution to financial institution, but here is an incomplete list–note that FHA loan rules require the lender to estimate all expenses associated with the loan including all “reasonable costs” to close the deal. That estimate must include the following if applicable:
- prepaid items
- discount points
- non-realty or personal property
- upfront mortgage insurance premium (UFMIP) amounts
- repairs and improvements
- real estate broker fees
- mortgage broker fees
- premium pricing on FHA-insured mortgages, and
- yield spread premiums.
Borrowers can and do pay for credit reports, appraisal fees, compliance inspections and other items, but if you have doubts about the legitimacy of a set of fees charged by the lender in association with an FHA home loan, contact the FHA directly at 1-800 CALL FHA to discuss your situation.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.