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FHA Closing Costs
Getting comfortable with the details
The bulk of your upfront expenses are incurred when your loan closes. Start planning for these by requesting a Good Faith Estimate (GFE) from your lender as soon as your loan application is approved. The actual costs you incur may be different from what's shown on the GFE, but at least the statement gives you an idea of what to expect. You might see the following items:
- Origination fee. The maximum origination fee is 1 percent of your loan amount, or 2 percent of the loan amount if it's a home equity conversion loan.
- Attorney's fees, title search fees, title insurance. Attorney's fees can range from $500 to $1,500, title search fees should be around $250, and title insurance costs vary widely depending on the home's location.
- Government recording and transfer fees. These should be less than $150.
- Pest inspection and/or flood certification. Expect about $200 total for these.
- Prepaid interest. You'll pay your lender for interest accrued between the closing date and month-end.
- Upfront premium for your FHA mortgage insurance. This will be 1.5 percent of the loan amount, but you may be able to roll it into your loan.
- Escrow amounts for future taxes and insurance: You may be required to prepay for homeowner's insurance and a portion of your property taxes.
The combined total of your closing costs may seem like a steep cover charge, but remember what you're getting in return: A place you can call your own.
Seller Concession/Contributions up to 6.00%
One of the greatest reasons for choosing an FHA loan is because the allowed seller contributions are increased from 3% to a 6%! This is usually more than enough to cover all of your closing costs, and this if course means that you will have more available money to furnish your new home.
For example, if you are about to place a bid on a house valued at $100,000 as the list price. You might be thinking about making an offer for the property in the amount of $94,000 since it is common practice to bid under the list price. But instead of placing that lower bid you might what to accept the list price as is on condition the seller pay 6% of the value toward your closing costs. So no you have covered all your closing costs and the seller is still getting the same amount of money they thought they would be in the first place.
This method also works if you have good reason to believe the property is valued much higher than the sales price. In the case the seller will not accept any amount below $100,000 and you have very good reason to believe the property is valued at $106,000 or more you may be able to add that 6% to the top of the loan giving you a loan in the amount of $106,000 but keep in mind the sales price must now be increase to $106,000 and now include a seller concession of $6,000 and the end result is the same for the seller and you have saved $6,000!
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| Loan Amount: | |
| Loan Term: | |
| Interest Rate: | |
| Down Payment: | |
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| $509.98 |
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| $183,593.00 |
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