Allowable FHA Fees

By
Mortgage and Lending with LoanOfficerSchool.com NMLS 291249

Allowable FHA Fees 2010Good Faith Estimate

This Old News but there is a lot of outdated information on the internet about FHA Allowable Closing Costs.

Forward Mortgage Allowable FHA Fees (30 year Fixed and ARMs)  In 2006 FHA discontinued itemized allowable and non-allowable fees.  Lenders can now collect from the borrower those customary and reasonable closing costs necessary to close the mortgage.  However, borrowers may not pay a Tax Service Fee. Reference  FHA Mortgagee Letter 2006-04

FHA also recently removed the one percent origination fee limit and now FHA buyers can be charged an origination fee customary for their marketing area.

SELLERS CAN PAY CLOSING COSTS

Buyers can 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). 

FHA home buyers must pay the 3.5% down payment from their own proceeds.

FHA Allowable Fees 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 Fees  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.

Find answers to all your lending questions: http://www.yourfhaguru.cm 

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Rainer
41,131
Patrick Randles
Nova Home Loans - Tucson, AZ

Bill,

This is good info. I did not know the seller could pay the upfront MI. Thanks.

Jul 31, 2009 03:34 AM #1
Ambassador
2,286,939
1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

Bill,

I have some questions about FHA closing costs.  I will email you.

Oct 20, 2009 01:38 AM #2
Anonymous
Carolann Bass

Bill:

I would like to know in detail what FHA borrowers may be charged and what FHA borrowers may not be charged.  Please allow me to give you my list of "may and may not's" and you confirm.  We are finding more and more junk fees that develop at close of escrow and I would like to have a better understanding.

MAY BE CHARGED (FHA)

Recording Fees: Actual Charges up to maximum allowable by FHA; Credit Report; Appraisal: Maximum allowable by FHA (which is $200) (not an additional 2nd field inspection); Title Insurance: ALTA - maximum allowable by FHA (which is ?); Tax Proration: To day of recording; Buyer's Protectin Plan: Need signed statement by borrower; Escrow Fee: FHA allowable (never more than seller); Termite inspection fee; Notary Fee; One-time MIP; Origination Fee: 1%; Inspection Fee (initial inspection only, not reinspection); Prepaid Interest: From date of recording; Discount Points: Not to esceed approved amount of firm commitment (refinance and purchase).

MAY NOT BE CHARGED (FHA)

Photo Fee, Warehouse Fee; Rent and interest on same day; Change of Ownership Fee; Preparation and drawing of docs (lender an escrow); Processing fee; tax Service Fee; HO Association transfer fee charge; Charges to other lenders; Federal Express, long distance phone charges or courier fees; Underwriting or Document Fee; Bring-down Fee; Packaging Fee; Document Transfer Stamp Tax; Loan Tie-in Fee; Sub-escrow Fee; Endorsement Charges (except refinances); Reconveyance Fee (except refinances); Wire Transfer Fee.

Please review the above an respond as quickly as you can to my question. 

Carolann Bass

vegasrealtors@aol.com

 

Mar 22, 2010 01:51 PM #3
Rainmaker
813,782
Bill Ladewig
LoanOfficerSchool.com - Escondido, CA
Experience Is Your Advantage

Judy, I look forward to your email.

Carolann,

FHA buyers pay all customary closing costs except they cannot pay for the Tax Service.

VA buyers cannot pay any lender fees except points, appraisal and credit.  They are also not allowed to pay for settlement or escrow services.

Mar 23, 2010 01:00 AM #4
Rainer
72,353
Jody Lautenbach
Century 21 Premier Associates - Pella, IA

Great information - thanks for sharing it. You can never know too much,

Mar 23, 2010 01:13 AM #5
Rainmaker
601,327
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Bill - correct me if I'm wrong but as of April 1st, aren't seller credits being reduced to 3%?  Seems I read that somewhere recently.  Now you're going to make me go and check because I swear I read that somewhere.  LOL

Mar 23, 2010 07:02 AM #6
Rainmaker
813,782
Bill Ladewig
LoanOfficerSchool.com - Escondido, CA
Experience Is Your Advantage

Jody, that is for sure, the minute we think we have a handle on it they change the rules

Donne, UFMIP is changing to 2.25% on April 5th but, as far as I know, the date has not been set on reducing seller credits.

Mar 23, 2010 07:08 AM #7
Rainmaker
601,327
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Bill - I do know about the UFMIP change.  As a matter of fact just this week, I told two new clients that while the app they're completing now states 1.75%, by the time they actually get into escrow, it will have changed to the new rate of 2.25%.

But I still remember seeing something about the seller credits.  I know now it wasn't FHA because I did check the recent mortgagee letters.  I'm thinking it was probably some notice or something from one of my lenders.  Of course, I can't find it now.  Go figure. 

Mar 23, 2010 09:44 AM #8
Rainmaker
813,782
Bill Ladewig
LoanOfficerSchool.com - Escondido, CA
Experience Is Your Advantage

Hi Donne, when Stevens put out his press release about the increased UFMIP he also mentioned that the max seller credit was going to be reduced.  My faulty memory tells me that they were going to release when it would be implemented in April.

Mar 23, 2010 10:06 AM #9
Rainmaker
1,087,992
Al Raymondi
Ocean View Realty Group in Ormond By The Sea Florida - Ormond Beach, FL
Ormond By The Sea Florida - Home and Condo Sales

Seems like the government will be an ever increasing player in real estate financing so we all need to keep up with the rules.  Thanks for this great explanation Bill.

Mar 26, 2010 01:39 AM #10
Anonymous
Julie
Can the Tax service fee paid by the seller be included in the set dollar amount of closing costs provided by the seller, or does it have to be in addition to?
May 26, 2010 02:28 AM #11
Ambassador
836,755
Charlie Ragonesi
AllMountainRealty.com - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros

Thanks for the post. We do USDA for the most part . But ther are times when we must go FHA. Your post was clear and very informative .

Nov 26, 2010 07:53 AM #12
Rainmaker
813,782
Bill Ladewig
LoanOfficerSchool.com - Escondido, CA
Experience Is Your Advantage

Thanks Charlie, USDA is a great loan in rural areas.

Nov 26, 2010 08:01 AM #13
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Bill Ladewig

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