A lengthy reader question came in recently, which we have edited for space and brevity’s sake. The reader asks, “I am a first time homebuyer & the originator of my FHA loan was (lender name deleted). In qualifying, it was clear my max affordable payment, including principle & interest, escrow, MIP, & interest was $1500 per month.”
“During the underwriting process I kept in touch with the broker to ensure no substantial increase in my monthly payment. On the day of closing my payment came in over $400 higher than originally quoted due to an increase in escrow estimation. My broker acted like he was surprised, then told me he later his primary concern was getting my loan closed within 90 days to prevent a new credit report being pulled due to a change in my credit score, therefore he overlooked this. I was also told the higher payment would only be for 4 months then would go back down once my escrow acct was satisfied & that it would be over therefore I would get a refund in September 2014 and my payment would then drop to the original amount estimated to me.”
It was not disclosed to me that the builder had not applied for the 5 year tax abatement, therefore I owe taxes 9/1/14 & my escrow amount doubled when my loan was bought by (Second lender name deleted) with my being notified, and the extra was taken from my principle therefore causing me to build less equity towards the loan.”
“My payment cannot be dropped unless I refinance, so the originator lied to me & did not disclose information to me that he should of. Now my debt to income is much higher, I do not have extra money to improve the home so I can sell it, I did not have the additional $400+ per month in my budget & am struggling while also having to give up extra things in life such as vacations, extracurricular activities, buying another motorcycle, etc.. When I asked about backing out (although I would of been homeless because I gave my place up) I was told it was too late since it was closing day, that I would lose all down payment money and could be sued by the builder for loss of sale. There is much more to this than I am able to put into this message so it would be great if someone could contact me and let me know what my rights are.”
We debated whether or not to include a reader question like this because of the complexity and level of detail involved, but one thing seems clear from the reader’s comments–it’s very important to address issues like these for one very important reason–borrowers need to be as well-informed and literate about the FHA loan process as possible.
Committing to an FHA home loan is a very important step–it’s a major financial undertaking and as such borrowers should take at least one year prior to the loan application not only to save money and budget for the expenses related to buying and owning a home, but also to research the loan process, learn what the borrower’s rights and responsibilities are, etc.
At any stage of the FHA loan process when a borrower has questions that need answering, it’s important to have detailed discussions with the lender and contact the FHA where necessary to get answers. (You can contact the FHA directly by calling 1-800 CALL FHA).
In cases like these, calling the FHA to request a referral to an FHA/HUD approved housing counselor may be the best move. A housing counselor can help answer questions and make plans to get a borrower better prepared for an FHA home loan.
Knowing your rights and responsibilities as early in the FHA loan process as possible is the best way to approach a home loan–borrowers shouldn’t wait to start learning how FHA loans work. You can request a referral to an FHA/HUD approved housing counselor early in the preparation stages to get you on the right track for your FHA mortgage. You can also learn more from the FHA official site under the section titled, Buying A Home
Do you have questions about FHA home loans? Ask us in the comments section.