Articles in Category: Closing Costs

September 16, 2019

What You Should Know About FHA Home Loan Amounts

Do you know what affects your FHA home loan amount? There are factors that the borrower controls such as whether to make the minimum required down payment or pay more down up front; there are also factors that are in the lender wheelhouse such as the amount of the origination fee and other closing costs. Not all of these factors automatically result in a different home loan amount. Some may be required to be paid up front in cash, others may permit financing in whole but not in part. Still, other expenses may not be required of all transactions but may apply to yours. You may find that in some housing markets, a charge or expense that is reasonable and customary may not be common in other housing markets. Some | more...

August 28, 2019

The Confusion Over Closing Costs Versus Down Payment

By Bruce Reichstein

Some borrowers get confused over the differences between closing costs and the required minimum down payment of 3.5% needed for FHA home loans. The confusion often comes over what is considered a down payment versus what is considered to be part of the borrower’s closing costs. The most basic thing to know is that the FHA home loan down payment is a standalone payment. It is NOT reduced by the amount of closing costs you pay such as the lender’s fee, appraisal costs, title fees, inspection fees, etc. But that isn’t all-FHA home loan rules, for example, do not permit your down payment to come from the seller. But FHA loan rules DO permit your seller to contribute a certain amount toward the closing costs of the loan. Note the | more...

August 23, 2019

FHA Loan Down Payment Rules: When More Is Required

By Joe Wallace

FHA home loan down payment rules allow for a low 3.5% down for borrowers who qualify with FICO scores in the 580-or-above category. FHA loan minimums do not address lender standards, which may be higher, but that is one reason why it’s important to shop around for the right FHA lender. The low FHA loan down payment is one reason why FHA mortgages can be so attractive, especially for first-time home buyers. But when will a borrower be required to put a higher amount down on the mortgage? There are several instances to be mindful of. FHA Loan Transactions That Require 15% Down: Identity Of Interest The FHA Single Family Loan Handbook, HUD 4000.1, says there are circumstances where 15% down is required; often when there is an identity of | more...

August 20, 2019

FHA Home Loans, Down Payments, And More: What You Need To Know Today

By Bruce Reichstein

First-time borrowers have many questions about the FHA home loan process including the subjects of down payments, seller contributions, and down payment assistance. Borrowers need to know that there are certain federal laws that require FHA home loans to limit the contribution of any third party with a financial stake in the outcome of the mortgage, and it’s good to know how these rules work. Seller Contributions Versus Seller Downpayment Assistance FHA loan rules state clearly that the seller of the home may not contribute funds toward the borrower’s down payment. This is expressly forbidden in the FHA loan rulebook, HUD 4000.1. However, sellers are permitted to contribute toward the borrower’s closing costs, capped at a maximum of six percent of the adjusted price of the property. Contributions in excess | more...

July 31, 2019

FHA Home Loan Down Payment Rules: Cash To Close Sources

By Bruce Reichstein

FHA home loan down payment rules include requirements for the sourcing of funds used to make that down payment and/or provide cash to close the deal. Down payment funds and sources of cash to close must be properly documented by the lender to insure the cash does not come from unacceptable sources such as non-collateralized loans (payday loans, credit card cash advances, etc.) or in the form of “gift funds” that are not really gifts but have an expectation of repayment. When discussing the permitted sourcing of FHA home loan down payments or cash to close, many borrowers want to know if certain kinds of sources are acceptable to the lender. That can include proceeds from the trade-in of a manufactured home, the proceeds from the sale of real estate, | more...

May 28, 2019

FHA Home Loans: Mistakes To Avoid When It’s Time To Close

By Bruce Reichstein

As you get closer to the day when you sign the paperwork, pay your closing costs, and take possession of your new home, there are some important mistakes to avoid. Do you know what they are? FHA home loan closing day is an important milestone; make sure you know what to expect leading up to the big day. Don’t Be In A Hurry Take the time to carefully read all documents you are required to sign, don’t skip the home inspection, and don’t give in to any kind of high-pressure sales tactics you encounter along the way. Buying a home is a major financial investment; give it the time it is due before you fully commit. Always Ask Questions You might feel that you should already know the answers to | more...

Can I Buy Investment Real Estate With An FHA Mortgage?

May 9, 2019

Fact And Fiction About FHA Home Loan Approval

By Joe Wallace

First-time home buyers and experienced home owners alike may have misconceptions about what it means to get an FHA loan. Here are some of the most common facts and fictions about buying a house with an FHA loan. FHA Loan Fact: FHA Mortgages Have Lower Down Payments and Credit Score Requirements 3.5% down is all that is required for borrowers with qualifying FICO scores. FHA loan minimum standards are more forgiving that some conventional mortgages but you will need to see whether lender standards allow certain lower credit scores to get loan approval with a higher down payment. Lender standards apply in addition to FHA loan minimums. But the fact is, your lender has the ability to work with your FICO scores in many cases. FHA Loan Fiction: You Have | more...

How FHA Loans Differ From Other Government-Backed Mortgages

May 3, 2019

Do You Qualify For An FHA Mortgage As A First-Time Home Buyer?

By Joe Wallace

Do you qualify for an FHA home loan as a first-time home buyer? There are several things you can check to see whether your credit and employment situations will allow a lender to justify approving your mortgage loan application. Buying real estate means making a major investment; potential borrowers who are not financially ready for this investment should take their time and prepare for it and commit when they are fully prepared. What does it take to get an FHA home loan approved? Stable Employment If you are considering applying for an FHA home loan without at least two years of work history, it may be a wise idea to consider delaying your application until you do have at least 24 months of work on your record. Anything less than | more...

April 25, 2019

FHA Loan Down Payment And Closing Costs

By Bruce Reichstein

The FHA home loan program has been described in other publications as being “the mortgage program first-time home buyers love”, but many people worry about closing costs and down payment requirements. How do you pay for FHA home loan closing costs and the down payment? The key is to first understand what these expenses are. FHA Home Loan Origination Fees and Other Closing Costs FHA home loans, like many other mortgage loan products, permit the lender to charge a loan origination fee. These fees will vary from lender to lender and it’s best to contact the lender directly to learn how much the origination fee might be. There may be other closing costs in addition to the ones mentioned below including expenses related to hazard insurance, compliance inspections, flood zone | more...

March 5, 2019

What You Should Know About FHA Loan Rules And Down Payment Gifts

By Bruce Reichstein

One of the appealing aspects of an FHA mortgage, especially for first-time borrowers who may have tight budgets, is the low 3.5% down payment. Some real estate studies show that the age group commonly known as Millennials paid roughly 8% down in the previous year. But does a typical FHA borrower, even a first-time home buyer who may not have a long credit history, have to pay that much down for a home? No. 3.5% is available for all financially qualified FHA borrowers. But even this down payment could be a financial burden depending on circumstances, which is why FHA loan rules allow for gifts of down payment funds from employers, relatives, or friends. You can also find a down payment assistance program in your local area to help, if | more...