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I plan on buying my first property, which will be a duplex, using an FHA loan. I will be living in one of the units, since this is a requirement for the loan. I believe the down payment must be anywhere from 3-3.5% depending on your credit.

What I need help understanding is the closing costs. On a 180000 property, at 3.5%, I would need to put $ 6300 down. I read that you can incorporate the closing costs into the loan amount. So for example, if my closing costs were another $ 6000. That amount would just be payed by the bank and then would be added into the mortgage amount owed? I’m a little confused on this.

I am trying to figure out the exact numbers so I can calculate the amount of money I would need to save. Down payment, closing costs, emergency repairs, furniture, etc….

4 Thoughts on Closing cost for an FHA loan?
  1. Reply
    February 14, 2014 at 8:47 am

    Wrong. FHA loans require that the closing cost be paid by the buyer. You can not add in the closing cost to the loan amount.

  2. Reply
    Steve D
    February 14, 2014 at 9:43 am

    No – you cannot add the closing costs back into the loan – that would negate the idea of a down payment which is to ensure you have some equity in the house prior to ownership. You may be able to roll some of the pre-paid Mortgage Insurance into the loan (check with the lender) or you may be able to get the seller to contribute towards closing costs.

    Assuming you get no closing help, expect to need about 10% of the price in cash – 3.5% for down payment, 5 – 6% for closing, and two month’s worth of payments in the bank over and above the down payment and closing. After that, it is up to you as to how much to pay to furnish, set aside, etc.

  3. Reply
    Beverly S
    February 14, 2014 at 9:55 am

    FHA down payment is 3.5% no matter what your credit is. You cannot add closing costs on top of the purchase price in the loan. FHA only lends 96.5% of the sales price of the house. Most people in my area of the country have the seller pay the closing costs though. You need to call an FHA lender & have them pre-approve you- they will give you the estimated amount you will need to bring. Keep in mind that you also have to pay your first years homeowners insurance at closing… $ 6000.00 may be low on the amount of costs.

  4. Reply
    February 14, 2014 at 10:03 am

    hey there,

    Her is my take. FHA does require 3.5% down; you cannot roll in costs….however, this is what I think it’s being missed. Let’s say your costs are $ 6000, then typically w/ negotiation the sales price is bumped by seller by that amt (depending on the market, and how much demand there is in the area). so technically you are rolling them in. so if the pp is $ 180,000 – the seller may counter to $ 186,000; this of course is all part of negotiation (how much room seller has between sp and what they owe, how desperate they are to sell, value of home,etc) You still put down 3.5%, but now you put 3.5% down based on the new sales price of $ 186,000, not $ 180,000. Best option is the $ 180,000 and seller to just pick up the costs, obviously.
    2nd option you can do is called credit for rate chosen, that is if you are tight w/ monies. Basically you pay a higher rate, and the lender picks up some of the costs. Drawback is that you have higher pmt. so you just have to compare and see what works.
    Good luck!

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