FHA No Closing Cost option
It’s hard to find a mortgage of your choice when you want to own a home. However, FHA loans offer all the benefits that other mortgages do not offer. However, this loan also has closing costs and is part of the agreement. If you want to purchase your home and apply for an FHA loan, you need to know the closing costs of an FHA loan.
What is the FHA closing cost?
FHA closing cost is a type of fee that the mortgage lender charges the borrower. Fees usually range from 2 percent to 6 percent of the home’s sale price. These fees include prepaid items and upfront mortgage insurance premiums.
However it is good to remember that the closing costs vary as states. Even in states where tax rates are high, closing costs are high. Get an estimate of closing costs from your lender before applying for a loan. You will receive the Closing Disclosure once all the details are set.
What is the closing cost of FHA?
The FHA has no fixed closing costs. Closing costs are usually determined based on the size of your mortgage.
For example, if your loan amount is $ 300,000 then in most cases the lender charges 1%, then your closing cost will be $3000. However, there are many lenders who charge only 0.5 percent closing costs, in which case you will be charged $ 1500.
Also included are some of the costs that you will have to pay for the assessment, title services and other agency costs.
Make sure you have enough money to cover these fees or expenses. 2 to 6 percent of your loan budget will cover these costs. If your loan amount is $ 300,000, you will need to pay $ 6000- $ 18,000 to cover these costs.
FHA Loan closing costs
Lender Fees: Closing fees include lender fees that you have to pay. Lender fees include underwriting fees, origin fees, document preparation fees and more.
Third party fees: These fees include title insurance, recording, notary, credit report, courier, attorney, appraisal and flood certificate fees that you must pay.
Pre-paid fees: You have to pay an advance fee to cover future expenses. These fees include escrow deposit, mortgage insurance, flood and HIP, real estate tax.
FHA Upfront Mortgage Insurance: If you default in the future, the lender is insured for compensation by the FHA. To protect the lender, you will have to repay 1.75% of your loan in advance. You need to repay this loan for at least two months.
How to save on FHA closing costs
It is possible to reduce FHA closing costs. Closing costs are considered a debtor’s responsibility, but you do not have to pay for it yourself. The advantage of FHA loan is that you can get a discount from the largest upfront mortgage insurance. Here are some tips to help you reduce the cost of closing.
Compare lender fees
Mortgage fees vary from lender to lender. So shop around and research to find out which lenders charge less closing fees.
Includes closing costs into debt
If you do not want to repay on your own, ask your lender to roll the closing costs into the loan. Although you can’t avoid closing costs, you don’t have to pay out of your own pocket.
Closing costs are rolled into the loan, so you get a large monthly mortgage payment to repay the loan. By doing so you can avoid paying and not even have to pay in the future.
Asked the seller to pay the closing cost
If closing costs are the only obstacle to purchasing your home then the seller is allowed to pay closing costs. According to FHA rules, sellers can include 2% to 6% of the property in closing costs. But whether the seller will help you depends on the demand for the property, the market of the housing and some other factors.
If the demand for property is good then such a decision of the lender in the current housing market is very rare. But if you are the sole buyer of the seller, he will surely want to help you.
Apply for assistance
Almost every state has the option of offering a loan without a grant or interest which lightens the borrower’s downpayment or closing costs. However, in order to qualify for Closing Cost Assistant, accommodation must be single family and primary residence.