June 21, 2011
When you apply for an FHA home loan, make the commitment to buy and close the deal, there are a variety of services which must be paid for as part of the home buying process. Some fees are paid by the borrower, some by the lender, and some by the seller. Do you know what fees you’re responsible for as a borrower taking out an FHA mortgage?
FHA loan fees the borrower must pay include a loan origination fee, which includes payment for the cost of doing business with your chosen lender. The buyer is also responsible for any title search and examination fees, plus legal fees where applicable.
For some home sales with an FHA loan, the sellers may agree to pay the legal fees–part of an incentive to close the deal. There are no specific rules in such cases as to who must pay legal fees for required services (unlike some other portions of the transaction where the FHA may specify who may pay certain expenses), but any legal help the borrower retains on his or her own are done at the buyer’s expense.
Did you know the buyer is also responsible for paying appraisal fees and any fees associated with hiring a mortgage broker? A broker is not required, but if one’s employed it’s the borrower who pays.
Discount points are often a source of confusion for some first time home buyers; the word “discount” implies a price break for the borrower. It’s true that purchasing discount points lowers the interest rate on the loan, saving the borrower money over the lifetime of an FHA mortgage. The buyer can purchase any discount points offered by the lender–one percentage point lowered per discount point purchased–to get a more competitive interest rate.
The borrower may pay for discount points when offered, and the seller may also pay discount points as an incentive to purchase. But don’t expect a “discount” up front as a result of paying points–your savings come over time, not on the front end on the sale of the home.
House hunters should plan on saving for the cost of buying a home as early as possible to prevent financial hardships later on. Some of the costs of getting an FHA home loan can be rolled into the loan itself, but the buyer must still pay certain fees and expenses up front as a condition of purchasing the home with an FHA insured mortgage.
That includes a closing fee, which is negotiated between the buyer and seller, any required notary fees, and up front mortgage insurance where required. All these items can add up, which is one reason real estate experts recommend a potential borrower start preparing at least a year in advance before deciding to purchase a home.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: