KBID 528 Date Created: 4/3/2003 Date Modified: 4/21/2017
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Except for the addition of an FHA mortgage insurance premium, FHA closing costs are similar to those of a conventional loan.
The FHA requires a single, up-front mortgage insurance premium equal to 2.25% of the mortgage to be paid at closing (or 1.75% if you complete the HELP program). This initial premium may be partially refunded if the loan is paid in full during the first seven years of the loan term. After closing, you will then be responsible for an annual premium, paid monthly, if your mortgage is over 15 years or if you have a 15-year loan with a loan-to-value greater than 90%.
The HELP program from the FHA - Homebuyer Education Learning Program - is structured to help people begin the home buying process. It covers such topics as budgeting, finding a home, getting a loan, and home maintenance. In most cases, completion of this program may entitle you to a reduction in the initial FHA mortgage insurance premium from 2.25% to 1.75% of the purchase price of your new home.
Although you cannot roll closing costs into your FHA loan, you may be able to use the amount you pay for them to help satisfy the down payment requirement. Ask your lender for details.
While FHA requirements define which closing costs are allowable as charges to the borrower, the specific costs and amounts that are deemed reasonable and customary are determined by each local FHA office. All other costs are generally not allowed and are usually paid by the seller when buying a new home, or paid by the lender when refinancing your existing FHA loan.
Allowed in an FHA refinance loan are wire transfer fees, courier fees, reconveyance fees, and fees to payoff bills.