Articles in Category: Closing Costs

FHA One-Time Close Construction Loans In 2019

December 8, 2016

FHA Loan Assumption Processing Fees

One of the benefits of FHA home loans is the ability to let another person assume the loan, with the participation of the lender. Most FHA loans today may be assumed by another person as long as the lender is involved in the process. Loan assumptions do have closing costs, including a processing fee. The FHA official site has announced changes in the processing fee structure for FHA loan assumptions. According to FHA Mortgagee Letter 2016-24, the agency’s maximum fee of $500 for processing an assumption where a credit check is required hasn’t been modified, “since it was established in the now superseded Handbook 4330.1 REV-5, Section 4-4A.2, dated September 29, 1994. As mortgagee expenses have risen since the maximum processing fee was established, it is appropriate to establish a | more...

How much can I borrow with an FHA refinance loan?

November 29, 2016

FHA Loans Closing Checklist

By Joe Wallace

Borrowers who buy a home with an FHA loans or any other type of home loan, learn that their closing dates and other details become very important the closer the borrower comes to signing on the dotted line and taking possession of the home. To help borrowers manage all the details about closing, federal law requires the loan officer to provide a closing disclosure that details expenses, fees, and other information. The government’s watchdog agency, the Consumer Financial Protection Bureau (CFPB) at ConsumerFinance.gov says of this disclosure, “Lenders are required to provide your Closing Disclosure three business days before your scheduled closing. Use these days wisely”. The three day period before you close should be used to review your closing details-use it like a closing checklist to make sure everything | more...

November 2, 2016

Down Payment Rules: An FHA Loan Question

By Joe Wallace

A reader asks, “I’m buying a home for 160,000 and the seller is paying up to 4000 in closing costs and pre-paids (which the closing cost ended up only being 3,525 because the lender required me to pay for the appraisal outside of closing POC) I also put 500 earnest money down.” “They are telling me that I have to bring 5,100 to closing instead of 4,625 because they said that I have to bring a total of 3.5% (5600) and the 475 that I already prepaid can not go towards my total 3.5% down. I thought that because I put 500 earnest money deposit and paid for the appraisal outside of closing and the seller is paying for all my closing costs, that I would be able to use | more...

October 5, 2016

Cash To Close For FHA Loans: Some Rules

By Joe Wallace

One commonly asked question about FHA home loans involves how the lender verifies the borrower’s sources of cash to close the loan. FHA loan rules in HUD 4000.1 require the lender to verify all sources of cash to close (including your down payment) and when dealing with this requirement the first time, some loan applicants are surprised when the lender asks for specific details such as account numbers, bank statements, etc. In an age where cyber fraud, phone scams, and “phishing” for account numbers make headlines on a near-daily basis, it’s not surprising that bank customers would question a lender’s request for account numbers and other financial data. A version of a common question in this area goes like this: “My lender says she needs verify my cash reserves and | more...

FHA Loans And Natural Disasters: What You Should Know

October 5, 2016

Cash To Close: Investments, Private Savings Clubs

By Joe Wallace

In our last blog post we discussed FHA loan closing costs and down payments-specifically the rules found in HUD 4000.1 that governs the sources of the funds for cash to close (down payments and closing costs). The lender is required to verify the source of all funds for down payments and closing costs, and the procedure can vary depending on the source of the funds, lender standards, state law, etc. Last time we examined the rules for funds that come from savings and checking accounts, but these aren’t the only types of sourcing options. For example, cash to close may come from investments such as stocks or bonds, or money saved up in private savings clubs. HUD 4000.1 instructs the lender on how to proceed with these types of sources. | more...

September 22, 2016

FHA UFMIP: A Reader Question

By Joe Wallace

A reader asks, “I want to purchase at home for 141,000 and I am paying the 3.5 down payment which totals it 136,065. How much will I pay in Up Front mortgage and annually MIP. If I pay the UFMIP in closing will it still be added into to total amount loan?” Let’s begin with a few basics. UFMIP stands for Up Front Mortgage Insurance Premium, which is required as one of the closing costs of an FHA mortgage loan. According to HUD 4000.1, “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” That last sentence means that your loan limit is unaffected by the amount of | more...

September 20, 2016

Down Payment Rules For FHA Loans

By Joe Wallace

FHA home loans differ from conventional mortgages in many ways, and one of those ways is that a lower down payment is required with FHA mortgages than for many conventional loans. A conventional mortgage may require a down payment of ten percent or more, depending on the borrower’s financial qualifications and other factors. But the FHA loan minimum down payment is (in most cases) 3.5% of the adjusted value of the property. But there are specific rules governing the down payment for mortgage loans, and FHA mortgages are no exception. The borrower’s “minimum required investment” or MRI (as HUD 4000.1 describes the down payment) must come from approved sources. Those sources can include a borrower’s own funds, gift funds that meet FHA requirements, cashed-out investments, proceeds from retirement accounts that | more...

August 11, 2016

FHA Loans and Cash Back

By Joe Wallace

FHA home loans have specific rules about when a borrower can get cash back on an FHA transaction and how. In general, FHA mortgage loans for new purchases don’t permit cash back except in the form of legitimate refunds, but HUD 4000.1 outlines certain circumstances where a small amount of cash back is permitted. However, that cash back cannot be “excessive”. A lender is required to estimate the costs of the loan before the actual expenses are tallied. These estimates could result in the borrower budgeting more than is required. When money is due back to the borrower, HUD 4000.1 states: “When the estimated costs utilized in calculating the maximum mortgage amount result in greater than $500 cash back to the Borrower at mortgage Disbursement, Mortgagees may reduce the Borrowers | more...

August 2, 2016

FHA Loan Questions About Seller Contributions

By Joe Wallace

A reader asks, “What extra expenses does a seller pay for a FHA offer compared to a conventional offer when selling their home?” Seller contributions and their limits are covered in HUD 4000.1. It’s impossible to speculate what the differences might be between an FHA mortgage and a conventional mortgage as loan terms may vary from lender to lender. However, FHA loan rules are clear on this subject in terms of what is permitted and what is not. Seller contributions are known as “interested party contributions” in HUD 4000.1. These must be negotiated between borrower and seller, but the agreed-upon contributions must meet FHA standards. FHA loan rules are quite clear-there is a cap on the value of seller concessions. Page 220 of HUD 4000.1 states: “Interested Parties may contribute | more...

July 27, 2016

FHA Loan Questions: Income Verification

By Joe Wallace

A reader asks, “I threw out my pay stubs not knowing that I would be purchasing a home this soon. Is there anything else that can be used in place of pay stubs to get approved for an FHA loan?” “I provided copies of my last four pay checks, a statement from my employer showing my cumulative earnings so far this year, my original W2s from 2014 and 2015, my federal and state taxes from 2014 and 2015, and three months worth of bank statements that show the direct deposit from my employer every two weeks for those three months.” In general, you may find that tax documentation, current pay stubs, and bank statements COULD provide an acceptable substitute, depending on the lender. However, this is a situation that requires | more...