FHA Loans are HOT! But how much are closing costs?
It's true - FHA loans are hot. A large number of Riverside and Corona homes that have been sold in the last couple of years have been financed with FHA loans. FHA loans are allowing many first-time buyers to purchase a home with very little cash to put down. The minimum down payment required by FHA is 3.5%. The maximum limit for FHA loans is $500,000 for both Riverside and San Bernardino Counties.
Since many people in the Riverside and Corona are using FHA loans, I want to provide some education about FHA loan closing costs. FHA loan closing costs are regulated by HUD. There are maximum fee limits in place so that the FHA loan program remains affordable to home buyers.
I’m going to talk about only part of the closing costs in this post. Always ask for a Good Faith Estimate from any lender you are seriously considering using for your home loan. They are required to provide them once you actually fill out an application for a loan.
There are several types of fees that you will see. Here is a brief explanation of some of these fees:
Lender Fees
Loan Origination: This fee is usually known as a loan origination fee but sometimes is called "points." It covers the lender's administrative costs for processing the loan. FHA allows only a maximum of 1% of the loan amount. Generally, the buyer pays the fee, unless otherwise negotiated.
Loan Discount: Also often called "points" or "discount points," a loan discount is a one-time charge by the lender to either lower the interest rate at which the lender would otherwise offer with your loan. It can also be used to lock-in the interest rate for an extended period. This fee may vary.
Appraisal Fee: This charge pays for an appraisal report made by an independent FHA appraiser. Typically range from $300 - $500.
Credit Report Fee: This fee covers the cost of a credit report, which shows your credit history. Usually $40 - $55.
Lender's Inspection Fee: This charge covers inspections made by employees of your lender or by an outside inspector that the lender requires.
Mortgage Insurance Application Fee: This fee covers the processing of an application for mortgage insurance. Note: FHA loans require Mortgage Insurance Premium – some of it is charged up front and some is paid monthly in your mortgage payment.
Assumption Fee: This is a fee which is charged when a buyer "assumes" or takes over the duty to pay the seller’s existing mortgage loan. We don’t see that type of loan very often.
Mortgage Broker Fee: Fees paid to mortgage brokers would be listed here.
Loan Processing Fee: This fee is for the administrative cost of processing your loan files.
Underwriting Fee: This is a fee charged by the investor for underwriting the submitted loan file and all of its paperwork.
Wire Fee: This is a fee charged by investor for wiring out the required funds to close the loan.
Click here to read my follow-up post with additional information about FHA loan closing costs.
If you are thinking of buying or selling a home in Riverside or Corona, call me 951-840-5212 or send me an e-mail vicki@pedersen-team.com Visit my website, http://Pedersen-Team.com
Copyright © 2009 By Vicki Pedersen, All Rights Reserved.*FHA loans- buying a home Riverside-Riverside CA homes*
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