When applying for an FHA mortgage loan you need to be aware that there will be closing costs. Closing costs can be paid by the seller or builder if they agree in advance or some can be tacked onto your principal balance. These are usually your prepaid items like PMI.
A good estimate of FHA closing costs is approximately 3% of your principal balance. This means if you are borrowing $200,000 then your estimated closing costs would be approximately $6,000.
FHA closings costs charges can include the following items:
- Application fee
- Credit report fee
- Origination fee
- Title search and insurance
- PMI – Insurance
- Documentation preparation fee
- Closing Attorney
- Recording fee and transfer fee
- Home inspection and termite inspection
- Courier fee / Recording fee (if any)
You can use an online FHA closing cost calculator to help you estimate what your approximate cost would be. A lot depends upon what you have negotiated on the sale with the seller. In today’s volatile housing market sellers and builders are more apt to negotiate and pay some or all of your closing costs.
Most online lenders have these loan calculators on their websites. You can also access the HUD or FHA website for more information. Local banks and mortgage brokers can easily help you apply for an FHA mortgage loan but you can also use websites like Lending Tree where they secure you quotes from different lenders.
An FHA loan is perfect for those with less than perfect credit and for those short on funds. These loans make home ownership affordable. With an FHA loan you will need just 3.5% of your own funds for the down payment. This money cannot be a gift from a friend or relative. Your credit score can be in the 500 point range with an FHA loan. They take explanation letters to help get your loan package approved by the FHA underwriters.
With interest rates at their lowest in years it is the perfect time to buy a house. Home prices are also extremely low due to the state of the economy. An FHA loan can help make your dream of owning a home a reality. Contact a local Real Estate Agent to help make your dreams come true.