Allowable FHA Closing costs 2009
Important: Much of the FHA home loan information found online today is outdated. Most aspects of FHA Loans have remained the same over the years, however there have been changes to the FHA closing cost policy. Many of these outdated articles claim there are FHA closing costs the buyer cannot pay, besides the Tax Service fee this is not true anymore..
Forward Mortgage Allowable FHA Closing Costs
In 2006 FHA discontinued itemized allowable and non-allowable fees. Lenders can now collect from the borrower those customary and reasonable fha closing costs necessary to close the mortgage.
However, borrowers may not pay a Tax Service Fee and may not pay more than a one percent (1%) loan origination fee. Reference FHA Mortgagee Letter 2006-04
Buyers are allowed to negotiate with sellers for the seller to pay FHA closing costs up to 6% of the purchase price. Actual FHA closing costs are between 3% and 3.75% of the purchase price depending on the amount of the FHA loan. The difference can be used to pay FHA discount points to buy down the interest rate.
The seller can also pay the FHA Up Front Mortgage Insurance Premium (UFMIP) as long as their total concession does not exceed 6% of the purchase price.
FHA home buyers must pay the 3.5% down payment from their own proceeds.
FHA Allowable Closing Costs for 203(k) Rehabilitation Loans: Lenders can collect from the borrower those customary and reasonable closing costs necessary to close the mortgage. However, borrowers may not pay a Tax Service Fee and may not pay more than a one percent loan origination fee.
Borrowers may also pay the Supplemental Origination Fee the portion of the mortgage proceeds allocated to the rehabilitation. (Cost of Rehabilitation) Reference FHA Mortgagee Letter 2006-04
Reverse Mortgage Allowable FHA Closing Costs The amount of the origination fee that can be charged to the HECM borrower can be negotiated between the lender and borrower, however, the amount of the origination fee that can be financed in the HECM loan is capped at the greater of $2,000 or two-percent (2.00%) of the maximum claim amount. The financed origination fee includes the costs for underwriting, processing, and any mortgage broker or loan correspondent fees. The HECM lender is Not permitted to charge a HECM borrower any fees in addition to the origination fee to pay a mortgage broker or loan correspondent fee.(Reference FHA Mortgagee Letter 2006-07)
FHA's Tiered Pricing Rules FHA's Tiered Pricing Rules prohibit a lender from charging higher prices (discount points) for low balance loans than the lender charges for higher balance loans. A lender's customary lending practices may not provide for a variation of more than two discount points (2.00%) charged on its FHA mortgages within a geographic area. In addition, any variation within two points must be based on actual variations in fees or costs to the lender to make the loan. Mortgagee Letter 1994-16 provides guidance to lenders with respect to tiered pricing rules. Additional guidance regarding pricing with respect to overages and yield spread premiums can be found in Mortgagee Letters 1994-43 and 2001-26.
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Bill Ladewig, Your FHA Guru
800.664.SAVE (7283)
For all your FHA Questions Email: Bill@YourFHAGuru.com
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