February 6, 2024
What do first-time home buyers need to remember about buying a home with an FHA mortgage?
Many home loan services you need to get to closing day are not centralized and you may have to deal with multiple service providers.
It’s good to anticipate the help you’ll need on your home loan journey. We explore some of those services below.
Brokers And Agents
A real estate agent can help new house hunters find a suitable home. It’s a third-party service you don’t have to use, but many choose to do so to make the process easier on them.
A mortgage broker provides a service to those who need a lender. A broker can match you with a participating FHA lender willing to work with you but you are not required to use one.
You can search for your own lender without third-party help. But if you’ve never looked for a home, this service could help you get started.
Appraisals, Inspections
Does your lender or seller erroneously refer to the appraisal process as an “inspection? Many do.
Remember, the appraisal is for the lender, and a home inspection is a tool for the borrower.
Never trust the results of the appraisal the way you would a home inspection. Why? Because appraisals are never as detailed as the home inspector’s work. These are two processes that are NOT the same, and they are not interchangeable.
These two costs are billed separately. The services should be rendered by separate providers.
Legal Fees
FHA loan rules in HUD 4000.1 say your FHA lender may not require the borrower to pay the lender’s legal fees. They cannot pass on their own real estate lawyer fees to you.
However, borrowers ARE required to pay legal fees for services they asked for from a lawyer. Do you need a real estate lawyer to review your purchase contract before you sign? In such cases, you will pay your own lawyer fees.
Pest Inspections, Pest Control
Should an FHA appraiser report evidence of wood-destroying pests in the home you want to purchase, you may be required to pay for inspection and/or pest control. Does the borrower have the ability to negotiate those costs with the seller? Yes, but it’s best to assume you must pay these yourself.
Are You Buying A Home In A Known Disaster Area?
Is your home in a known natural disaster zone? For some disaster types, there may be a third-party expense to consider. For example, your FHA lender may require a flood zone determination, a cost the borrower normally pays for.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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