April 15th, 2018 8:40 AM by Jackie A. Graves, President
process of buying a home loan can be confusing, especially at the closing.
All mortgages, including those insured by the Federal Housing
Authority, come with a laundry list of closing fees that typically
add up to 3 percent to 5 percent of your purchase price, depending on the terms
you negotiate with your seller and lender.
what you need to know about FHA closing costs—and
how to get the best deal.
loans are issued by private banks and financial institutions approved by the
U.S. Department of Housing and Urban Development. Because the loans are
insured by the FHA, a government agency, lenders are more likely to
approve buyers with less than stellar credit scores and those who can’t afford
a large down payment. In fact, buyers can get FHA loans with as little as 3.5
secure an FHA loan, however, the borrower must pay an upfront insurance premium
of 1.75 percent of the loan amount, as well as ongoing monthly
insurance premiums that vary depending on the loan amount,
loan-to-value ratio and length of the loan.
costs for FHA loans are similar to those of conventional loans, because private
lenders incur the same costs when making the loans, including fees for credit
reports, appraisal, title search and other costs. Under HUD rules, lenders are
allowed to charge “customary and reasonable closing costs,” not to exceed 3
percent of a qualified loan of $100,000 or more, or 5 percent on loans of
$60,000 to $100,000.
means that if you buy a $200,000 house with a $7,000 down payment, you could
potentially pay up to $5,790 in closing costs ($193,000 x .03). In other words,
you’d need to save up $12,790 to secure your loan.
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