Calculating FHA Closing Costs

Michael Drew | FHA Loan

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
  • Survey
  • 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.…

fha loans

FHA Loan Basics and Benefits

Michael Drew | FHA Loan

An FHA loan is basically meant to make things easy with a lender when somebody wants to be a homeowner or needs refinancing. In this sense, the Federal Housing Administration doesn’t actually offer loans, but simply insures them. A summary of the benefits of these loans would include lower down payments and closing costs, and a lower credit threshold.

This means the lender can offer better terms and many people who would otherwise not qualify on credit grounds are able to get a better deal. The interest rate charged by a lender for the same loan varies based on a person’s credit score. But if it is insured by the Federal Housing Administration, the lender will offer an interest rate that’s usually only available to people with much higher credit scores.

Nowadays lenders are making sure people pay huge down payments for mortgages in case the property value drops further. At such a time, an FHA loan offers prospective homeowners a low down payment.

The mortgage finance also includes most of the closing costs.

The net effect is that the homeowner gets a good rate on a mortgage without a big down payment or a high credit score.

For those who need to buy a house and do some repairs or remodeling, it’s possible to get all of it financed as a single mortgage. A new trend that many homeowners are opting for is to make energy-saving improvements, which can also be included in the mortgage.

The Federal Housing Administration will even support reverse mortgages where the homeowner wants cash in return for diluting equity. There are, of course, certain guidelines and restrictions that apply. For instance, there is a ceiling on property values that vary based on the location.

There are also fewer repair demands now than before. For instance, unless a roof is leaking it doesn’t have to be replaced, even if it is old.

The summary of it is that an FHA loan offers all the benefits it has had over the conventional mortgage, and now it is also much less restrictive.…