Articles in Category: Closing Costs

September 20, 2017

How Do FHA Mortgage Loan-To-Value Limits Work?

How do FHA mortgage loan-to-value limits work? The loan-to-value (LTV) limit is an indicator of how much of a down payment you’ll be required to make on the FHA mortgage loan. There’s no such thing as a no-money-down FHA mortgage for new purchases, so the LTV is an important detail in your loan transaction. The rules covering FHA LTV ratios are found in HUD 4000.1, the FHA loan handbook. There we learn the following by way of introduction to the FHA requirements in this area: “The determination of the maximum LTV percentage available is influenced by…the particular mortgage insurance program (See Programs and Products); and the transaction type. The Mortgagee must apply the lowest applicable LTV percentage as determined under the requirements in this section.” Your LTV limits are determined, | more...

August 31, 2017

Do I Have To Make A Down Payment On An FHA Mortgage?

By Joe Wallace

One variation of a commonly asked question about FHA home loans is, “Do I have to make a down payment on an FHA mortgage?” This question gets asked sometimes in reference to other government-backed loans that feature no down payment (available via a Department of Veterans Affairs program offered to qualifying military members and certain military spouses only). FHA home loans do require money down-the borrower’s minimum required investment is 3.5% of the adjusted value of the home. But there are situations where more money down may be required. Credit Score Issues Potential FHA borrowers who have credit scores outside the standard required scores (580 or higher for the FHA program minimums, though lender requirements may be higher) will be required to put more money down. This applies to borrowers | more...

August 18, 2017

Can My Seller Pay Some Of My Closing Costs?

By Bruce Reichstein

Can my seller pay some of my closing costs? The basic answer is, “yes, within certain limits.” FHA loan rules permit certain expenses to be negotiated between buyer and seller, including the contribution of allowed costs. How does it work? FHA Loan Rules For Interested Party Contributions HUD 4000.1, the FHA loan handbook, defines “interested parties” as “sellers, real estate agents, builders, developers or other parties with an interest in the transaction”. HUD 4000.1 states that such interested parties are permitted to offer payments on “origination fees, other closing costs and discount points” within the bounds of FHA loan rules (more on that below), state law, and lender standards. What Payments Can An Interested Party Contribute? HUD 4000.1, page 232, states that an interested party or parties may contribute towards | more...

Can I Get An FHA Loan For A Mixed-Use Property?

August 15, 2017

What Should I Know About FHA Appraisals?

By Bruce Reichstein

What should I know about FHA appraisals? There are many factors to remember about the FHA appraisal process, and not all of them have to do with the act of doing the appraisal; borrowers need to know how the appraisal fits into the overall process of applying for an FHA loan and getting loan approval. FHA Appraisals Are A Typical Expense The appraisal fee is a standard part of a home loan’s fees and expenses, and borrowers should save money for both the appraisal and the possibility of additional fees that could be required depending on the outcome (more on that issue below). Borrowers should keep in mind that the home loan cannot be approved without the results of the appraisal, so it’s best to come to the loan process | more...

Can I use disaster relief for my FHA loan down payment?

August 9, 2017

What Can I Add To My FHA Mortgage Loan?

By Bruce Reichstein

What can I add to my FHA mortgage loan? There’s a list of items that may be allowed to be added to your mortgage loan above and beyond the adjusted value of your property. Let’s examine what the FHA loan handbook, HUD 4000.1, has to say about adding certain costs to your home loan amount. Calculating The Maximum Mortgage Amount On Your FHA Loan To start, let’s see what HUD 4000.1 says about how the lender is expected to calculate the maximum mortgage amount. “The maximum mortgage amount that FHA will insure on a specific purchase is calculated by multiplying the appropriate LTV percentage by the Adjusted Value. In order for FHA to insure this maximum mortgage amount, the Borrower must make a Minimum Required Investment (MRI) of at least | more...

July 12, 2017

What Is An FHA Loan Down Payment? Sources Of Down Payment Funds

By Joe Wallace

What is an FHA loan down payment? We examined the basics in our last blog post, but one important issue related to down payment funds? Their source. FHA loan rules state that the lender must verify the source of all funds to be used in the down payment. Not all sources are eligible to be used; FHA loan rules have strict guidelines about how and where such funds may be derived. For example, while borrowers are permitted to get down payment help from outside sources, none of those sources may have a financial stake in the outcome of the transaction. So your seller may not directly provide down payment funds, and any other contributing party cannot get reimbursement from anyone involved in the transaction. Down Payment Source Funds: The Official | more...

July 12, 2017

What Is An FHA Loan Down Payment?

By Bruce Reichstein

What is an FHA loan down payment? Simply put, your down payment on a home loan is an investment paid up-front which is separate from other loan expenses. The original idea behind making a down payment likely had something to do with the idea that a borrower who has invested a serious portion of cash up front on the home purchase has a greater interest in paying their mortgage, not defaulting on the loan, and being a successful home owner. FHA loan rules which govern the down payment are found in HUD 4000.1, the FHA loan handbook, and have plenty to say about the amount and sourcing of an FHA mortgage loan down payment. What Is An FHA Loan Down Payment? The FHA loan handbook describes the down payment, also | more...

June 20, 2017

Low Down Payment FHA Loans

By Bruce Reichstein

What is the key to low down payment FHA loans? The answer might surprise you, especially if you’re a first time home buyer. Getting a mortgage loan means (in most cases) that the borrower must budget and save for a down payment, but the amount of that down payment can vary quite a bit depending on the lender. For conventional loans you may find down payment requirements between five and 20 percent. But with FHA home loans, that amount can be as low as 3.5% of the adjusted value of the property. For FHA loan applicants who have FICO scores that may be considered “marginal”, that down payment requirement may be adjusted to 10%. Why the higher down payment? FICO scores. Believe it or not, your credit rating can be | more...

June 14, 2017

Closing Costs And Earnest Money For FHA Loans

By Joe Wallace

In a recent post we discussed FHA loan down payments and how the lender is required to verify that down payment money is coming from acceptable sources. Did you know the lender is also required to verify the sources of earnest money and funds to pay closing costs? It’s true-FHA home loan rules include requirements that these funds comply with FHA loan rules. For example, if your earnest money comes to you in the form of a gift, those gift funds must meet the rules and requirements of the FHA Loan Handbook HUD 4000.1 section titled Gifts (Personal and Equity): “Gifts refer to the contributions of cash or equity with no expectation of repayment.” This means your earnest money gift must never carry any strings attached. But that isn’t all-the | more...

Can I Get A Second FHA Appraisal If I Don't Agree With The First One?

May 8, 2017

FHA Loan Fees: A Reader Question

By Joe Wallace

A reader asked us a question in the comments section recently about FHA loan fees. “What is the total that lender can charge on an FHA loan?” Unfortunately there is no single answer to this question. FHA loans, and all mortgage loans, have costs that will vary depending on the lender, the transaction, whether or not sellers agree to pay some of the closing costs or other expenses. etc. Even the FHA loan funding fee, which is a standard part of all this, is based on a percentage of the mortgage amount. That amount naturally varies depending on the transaction. FHA loan rules in HUD 4000.1 instruct the lender: “The Mortgagee or sponsored TPO may charge a reasonable origination fee. The Mortgagee or sponsored TPO may charge and collect from | more...