Articles Tagged With: FHA Closing Costs

April 23, 2024

What You Need To Know About FHA Loan Closing Costs

What must you know about FHA home loans, cash to close, and your obligations at closing time? If you are a first-time homebuyer, it’s easy to get confused (initially) about the difference between your down payment money, closing cost funds, and other expenses like the home inspection. Some of the early confusion comes from the fact that some do not understand the FHA philosophy about the down payment and the other expenses associated with closing day. That money is not lumped into your downpayment requirement when you pay closing costs. In other words, if you pay X amount of money at closing time for things like the FHA Up-Front Mortgage Insurance Premium and other expenses, that money is NOT considered part of your FHA loan downpayment. HUD 4000.1, the FHA | more...

February 20, 2024

Before You Close Your FHA Home Loan

By Bruce Reichstein

Once your FHA loan application is approved by your loan officer, is your FHA loan really “bulletproof” until closing day? Some believe that it is, but this is not true, there are many things that could wind up stopping a home loan before closing day. For example, your seller may change their mind and decide not to sell. The house might appraise for a lower amount than the seller asks for, and the borrower ultimately chooses to back out of the deal. There are too many scenarios to count. A home that is damaged or destroyed before the closing day is just one variable. While that may sound extreme, that’s a problem that happens often enough to require provisions in FHA loan regulations to guide borrowers and lenders through. Don’t | more...

January 29, 2024

What You Need To Know About FHA Loan Closing Costs

By Joe Wallace

How much cash to close do you need for an FHA mortgage? Many sources cite a number between 2% and 6% of the purchase price. Borrowers typically need to learn how much home is affordable early in the planning stages. Make these calculations as early as possible to help you save for both the down payment and closing costs. How Much You Can Afford To Borrow? An online mortgage calculator can help you get an idea of how much loan to apply for. Borrowers may be tempted to view that number as being flexible but that can come with a price. Beware of what some call “cost creep.” A little leeway on a service cost, a higher-than-expected expense, and over time it’s possible to find yourself moving outside your budget. | more...

FHA Home Loans And First Time Home Buyers

July 24, 2023

FHA Lender Requirements and Bank Policies

By Joe Wallace

Here is a variation on a typical question we are frequently asked. “I applied for a loan and was told I must submit proof of filing a tax extension for a previous tax year. I was told by my loan officer that I need to show proof of an extension to be approved to close. Is this correct?” There are two critical issues in a situation like this to remember. One is how FHA loan rules work and how lender policies work. The FHA loan program is a voluntary one for financial institutions. Not all lenders participate, but those who do have to meet FHA loan standards and observe FHA guidelines for the loan program. Most financial institutions have their own guidelines above and beyond FHA loan program regulations. If | more...

June 22, 2023

FHA Loan Rules For Income: Investments, Trusts, and Promissory Note Payments

By Joe Wallace

Part of the FHA loan approval process involves the lender verifying an applicant’s income. FHA rules state that for purposes of calculating a borrower’s debt-to-income ratio, only verifiable income can be counted in that ratio. Do FHA rules allow a borrower’s interest or dividend payments from investments to be counted as verifiable income? For some borrowers, this can be an important question. According to the FHA Lender’s Handbook, “The Mortgagee must verify and document the Borrower’s Investment Income by obtaining tax returns for the previous two years and the most recent account statement.” Additional instructions to the lender for this issue include the requirement that when making the calculation. “The Mortgagee must subtract any of the assets used for the Borrower’s required funds to close to purchase the subject Property | more...

February 27, 2023

Anticipating Closing Costs For Your New Home Loan

By Joe Wallace

Buying a home requires planning and saving. Especially for closing costs, which can include appraisal fees, the home inspection, compliance inspections, and the Up-Front Mortgage Insurance Premium. It takes time to save for these expenses, but some borrowers will pay more up front than others. That is usually due to a combination of factors, but the thing new home loan applicants need to know is that your financial needs and goals will dictate how and when you pay certain closing costs. Did you know you can finance some closing costs and have the home’s seller help you pay for others? Government-backed mortgages like FHA home loans (including FHA One-Time Close construction loans which can help even a first-time home buyer build a home from scratch) make buying or building a | more...

February 23, 2023

Rent Or Buy?

By Joe Wallace

For some, buying is better. Why? Much depends on your financial goals but you should also take into consideration aesthetics and practical concerns, too. One argument favoring buying or building (on your own lot) a home with an FHA mortgage? The ability to modify your property without having to go running to the landlord to ask permission is a big one. But some renters don’t realize that you can when you own your home, also apply for a refinance loan to repair or modify your property. That is not something you can do with a rental unit. You’re basically at the mercy of the landlord in such cases. Another argument in favor of buying a home with an FHA mortgage instead of renting? The ability to purchase a multi-unit home | more...

February 8, 2023

Can You Buy Land With An FHA Loan?

By Bruce Reichstein

There are several reasons why a house hunter looking for a home to purchase with a VA mortgage might want to buy a piece of land. In times when the housing market is favorably inclined towards new construction loans, some buyers might want a government insured loan for a proposed construction or new construction purchase; others might want to buy a piece of land for a manufactured home or mobile home.

January 17, 2023

Closing Costs Versus Down Payment

By Bruce Reichstein

Some borrowers get confused over the differences between closing costs and the required minimum down payment of 3.5% needed for FHA home loans. The confusion often comes over what is considered a down payment versus what is considered to be part of the borrower’s closing costs. The most basic thing to know is that the FHA home loan down payment is a standalone payment. It is NOT reduced by the amount of closing costs you pay such as the lender’s fee, appraisal costs, title fees, inspection fees, etc. But that isn’t all-FHA home loan rules, for example, do not permit your down payment to come from the seller. But FHA loan rules DO permit your seller to contribute a certain amount toward the closing costs of the loan. Note the | more...

April 7, 2022

What Do FHA Loan Closing Costs Include?

By Bruce Reichstein

What do FHA loan closing costs include? There are certain fees and expenses you will need to save up for during the planning stages of your FHA home loan. They include an up-front mortgage insurance premium, home inspection, appraisal fees, and other costs that add up and you may encounter unexpected costs like a compliance inspection that would come on the heels of the appraisal where repairs or corrections are required. They are not required in all home loan cases (only when deemed necessary as a result of the appraisal), so it’s not an expense you will definitely have to pay. Remember that the less you have included in the loan amount (certain permitted closing costs may be added to the loan) the lower your mortgage payments potentially are. Closing | more...