May 8, 2017
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 Borrowers those customary and reasonable closing costs necessary to close the Mortgage. Charges may not exceed the actual costs.”
The reasonable and customary expenses of a home loan can and usually do include an “origination fee” which is the lender’s fee for services rendered.
Furthermore, the lender is required to verify the source of all money used to pay such fees. From HUD 4000.1:
“The Mortgagee must document all funds that are used for the purpose of qualifying for or closing a Mortgage, including those to satisfy debt or pay costs outside of closing. The Mortgagee must verify and document that the Borrower has sufficient funds from an acceptable source to facilitate the closing.”
While there is no way for us to predict the actual dollar amount that a borrower will pay in FHA loan fees and expenses on an FHA mortgage, the lender is legally obliged to provide documentation of those costs via the Good Faith Estimate, and later when the loan is approved and actually going to happen via the HUD-1 Settlement Statement.
Consumers have the right to know how much they will pay for their mortgage loan including interest rates, closing costs, appraisal fees, and other expenses. The Good Faith Estimate and HUD-1 Settlement Statement are both tools to help the borrower understand the costs of the loan.