Although Federal home loans require either a low down payment, or none at all, there is still the subject of closing costs. As discussed in our previous Loan Terms Glossary piece, closing costs are usually two to five percent of the home’s purchase amount and must be paid at the close of escrow before the title is handed off. What will these costs be for you, and can someone else pay them or gift them?
USDA CLOSING COSTS
As long as the borrower undertakes responsibility for the costs, the closing costs can be financed into the loan, which makes it different from the VA and FHA closing costs. The closing costs can be gifted from someone else, such as the lender, seller, builder, or a family member. This benefit, along with no down payment, low interest, and no private mortgage insurance required makes the USDA home loan a well sought-after home loan program. Closing costs will be comparable to any conventional home loan and the FHA home loan closing costs.
FHA CLOSING COSTS
You unfortunately cannot finance closing costs into the FHA home loan, which means you can’t have it as part of your monthly mortgage payment. The good news is that the lender or a family member can pay these costs as a gift for the lender. A home builder is also able to pitch in, if they choose. While not a gift, the seller of the home may provide a credit for the closing costs if the purchase contract is written to include this.
FHA home loan borrowers will have the typical closing costs any consumer would have to pay on a home loan and, as of 2015, sellers can pay only up to six percent of the borrower’s closing costs. With all of the interest being saved by going through an FHA home loan and the low 3.5 percent down payment requirement, you will already be saving quite a bit of money.
VA CLOSING COSTS
If a VA home loan borrower has to pay closing costs, they have a cap of 1%. The Realtor®, lender, family member, or property builder can help pay for the veteran or surviving spouse’s closing costs in total as gifted funds.
Closing costs can’t be funded into the loan’s monthly payments, but they can be negotiated. A good lender will always try to obtain rebates to return them back to the borrower to pay these closing costs. The seller may not pay for more than four percent of the closing costs.
The closing costs may consist of a 1 percent loan origination fee, followed by a list of allowable charges during the closing process.
Like the FHA and USDA loan, the seller can provide a credit to pay for the buyers closing costs if it is written into the contract.
It’s beneficial, in this case, to list what the veteran may never be charged for during the closing process: the appraisal, lender inspection fees, escrow fees, tax service fees, document processing fees, charges such as faxing/mailing/stationary the broker/lender/Realtor® had to spend, commission of Realtor®s and brokers, termite inspections (except for cases of a refinance), non-title attorney costs, and builder inspection fees.
If you want are seeking more detailed info on what your closing costs may be, or if you want a pre-approval, contact a representative via this site’s chat engine, or call (877)432-5626(LOAN). Feel free to tweet us questions to @FedHomeLoan.