| FHA loan closing costs are regulated by
HUD. There are maximum fee limits in place so that the FHA loan program remains affordable
to home buyers. Additionally, some loan fee's may not be paid by the buyer / owner and are
traditionally paid by the home seller / lender. To easily
understand the closing costs description below, you may want to download a sample
"Good Faith Estimate" to view the form in it's entirety by clicking >>
Here.
The form is broken into six separate sections. Each section is
located below. The item number on the right side is from all legal HUD / Respa compliant
forms. Please click on "Explanation of Fee" to learn more about the fee.
Loan Fee's
Below is a sample of a section of each section of a
Good Faith Estimate that covers the loan fee's and charges of the lender. These fee's in
this section are charged by the lender.
Following is a description of the normal non-reoccurring closing
costs for a FHA loan. These fee's are typically paid by the buyer or owner. It may be
negotiated that all or part of these fee's may be paid by the home seller or lender.
801. Loan Origination:
This fee is usually known as a loan origination fee but sometimes is called a
"point" or "points." It covers the lender's administrative costs in
processing the loan. FHA regulates this fee to a maximum of 1%
of the loan amount. Often
this is expressed as a percentage of the loan. Generally, the buyer pays the fee, unless
otherwise negotiated.
802. Loan Discount:
Also often called "points" or "discount points," a loan discount is a
one-time charge imposed by the lender or broker to either lower the rate at which the
lender or broker would otherwise offer the loan to you or may be used to lock-in the
interest rate for an extended period. This fee may vary.
803. Appraisal Fee:
This charge pays for an appraisal report made by an independent FHA appraiser. Typically
range from $300 - $500.
804. Credit Report Fee:
This fee covers the cost of a credit report, which shows your credit history. The lender
uses the information in a credit report to help decide whether or not to approve your loan
and how much money to lend you. Typically $40 - $55.
805. Lender's
Inspection Fee: This charge covers inspections, often of newly constructed
housing, made by employees of your lender or by an outside inspector. (Pest or other
inspections made by companies other than the lender are discussed in line 1302.)
806.
Mortgage Insurance Application Fee: This fee covers the processing of an
application for mortgage insurance.
807. Assumption Fee:
This is a fee which is charged when a buyer "assumes" or takes over the duty to
pay the seller’s existing mortgage loan.
808. - 809. Mortgage
Broker Fee: Fees paid to mortgage brokers would be listed here. A CLO fee would
also be listed here.
810. Loan
Processing Fee:This fee is for the administrative cost
of processing your loan files required paperwork.
811. Underwriting
Fee: Fee charged by investor for underwriting the
submitted loan file and all of its paperwork.
812. Wire Fee:
Fee charged by investor for wiring out the required funds to close
the loan.
813. Flood
Certification: Every FHA loan request a flood report to
insure that it is not located in a flood zone. If property is in
flood zone, owner required to obtain flood insurance.
Prepaid Items
The following fee's are reoccurring pre-paid fee's. You may
be required to prepay certain items at the time of settlement / closing. Some of these
items would be accrued interest, mortgage insurance premiums, and homeowners / hazard
insurance.
901. Interest: Lenders
require borrowers to pay the interest that accrues from the date of settlement / closing
to the first monthly payment which is prorated daily based on the new loans interest rate.
902. Mortgage
Insurance Premium: FHA Mortgage Insurance Premium fee is 1.5% of the loan amount.
This fee may be financed into the loan amount. If you pay the FHA loan off within the
first seven years, you may be entitled to a prorated refund of the MIP.
903. Hazard
Insurance Premium: Hazard insurance protects you and the lender against loss due
to fire, windstorm, and natural hazards. Lenders often require the borrower to bring to
the settlement a paid-up first year’s policy or to pay for the first year's premium
at settlement.
904. Flood Insurance:
If the lender requires flood insurance, it is usually listed here.
Escrow Impound Account Reserves
All FHA loans require the establishing of an escrow
impound account. This account allows your property taxes and homeowners / hazard insurance
to be included in your monthly payment and paid annually as needed.
1001. Hazard
Insurance: Usually 2 months prorations of your annual homeowners / hazard
insurance policy.
1002. Mortgage
Insurance: Usually 2 months of the monthly FHA mortgage insurance premium.
This monthly fee is calculated as .5% of the final FHA loan amount divided by 12 for the
monthly prorations.
1003. City
Property Taxes: Some cities have assessed property taxes which would be
collected here. This will vary from city to city.
1004. County
Property Taxes: The amount of property
taxes collected will vary and would be prorated based on the number of payments made on
the new loan to until your property taxes are due. May be from zero to eleven months in
advance.
1005-1007.
Other Prorations: These would be any other fee's such as HOA dues.
1008.
Aggregate Adjustment: The lender is not allowed to collect more than a
certain amount. The individual item deposits may overstate the amount that can be
collected. The aggregate adjustment makes the correction in the amount on line 1008. It
will be zero or a negative amount.
Title & Other Fee's
This fee's are all other fee's associated with obtaining a
FHA loan. Although these are not lender fee's, lenders must provide a quote of the
estimated fee. These quotes may vary significantly. Title charges may cover a variety of
services performed by title companies and others. Your particular settlement may not
include all of the items below or may include others not listed.
1101.
Settlement or Closing Fee: This fee is paid to the settlement agent or escrow
holder. Responsibility for payment of this fee should be negotiated between the seller and
the buyer.
1102-1104. Abstract of Title
Search, Title Examination, Title Insurance Binder: The charges on these lines cover
the costs of the title search and examination.
1105. Document
Preparation: This is a separate fee that some lenders or title companies charge to
cover their costs of preparation of final legal papers, such as a mortgage, deed of trust,
note or deed.
1106. Notary Fee: This
fee is charged for the cost of having a person who is licensed as a notary public swear to
the fact that the persons named in the documents did, in fact, sign them. Usually $40 -
$120.
1107. Attorney's Fees:
You may be required to pay for legal services provided to the lender, such as an
examination of the title binder. Occasionally, the seller will agree in the agreement of
sale to pay part of this fee. The cost of your attorney and/or the seller’s attorney
may also appear here. If an attorney's involvement is required by the lender, the fee will
appear on this part of the form, or on lines 1111, 1112 or 1113.
1108. Title Insurance:
The total cost of owner's and lender's title insurance is shown here.
1109. Lender's
Title Insurance: The cost of the lender’s policy is shown here.
1110.
Owner's (Buyer’s) Title Insurance: The cost of the owner's policy is shown
here.
Recording and Transfer Fee's
These fees are city, county and state fee's. They may be
paid by you or by the seller, depending upon your agreement of sale with the seller. The
buyer usually pays the fees for legally recording the new deed and mortgage (line 1201).
Transfer taxes, which in some localities are collected whenever property changes hands or
a mortgage loan is made, can be quite large and are set by state and/or local governments.
City, county and/or state tax stamps may have to be purchased as well (lines 1202 and
1203).
| 1200. GOVERNMENT RECORDING AND TRANSFER CHARGES |
| 1201. Recording fees: Deed $ ;
Mortgage $ ; Releases $ |
|
| 1202. City/county tax/stamps:
Deed $ ; Mortgage $ |
|
| 1203. State tax/stamps: Deed $ ;
Mortgage $ |
|
| 1204. |
|
| 1205. |
|
Additional Settlement Charges:
These may be other third party fee's for
services rendered in order to satisfy all loan, buyer, and seller requirements. All FHA
loans require a termite report and clearance. Again, these fee's are negotiable between
buyer and seller.
1301. Survey: The lender
may require that a surveyor conduct a property survey. This is a protection to the buyer
as well. Usually the buyer pays the surveyor's fee, but sometimes this may be paid by the
seller.
1302. Pest
and Other Inspections: This fee is to cover inspections for termites or other pest
infestation of your home.
1303-1305.
Lead-Based Paint Inspections: This fee is to cover inspections or evaluations for
lead-based paint hazard risk assessments and may be on any blank line in the 1300 series.
If your transaction is a purchase, the total of all of these fee's
would then be added to the amount of your down payment, which would total the amount
needed to close your transaction.
For a refinance, these fee's could be added to your new loan amount,
paid out of pocket, or financed into the interest rate with a lender credit.
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