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closing costs associated with FHA DPA loans
What are the closing costs associated with FHA DPA loans?
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When obtaining a Federal Housing Administration (FHA) loan with Down Payment Assistance (DPA), the core closing costs will remain quite similar to the costs of the standard FHA loan. This holds except for a few variables that could depend on the type of assistance program. Here are the ordinary closing costs you can expect for the project; most often, closing costs range between 2% and 6%.
Home Purchase:
There are two types of costs for a home purchase: the down payment and closing costs. With down payment assistance, homebuyers normally do not have to worry about the down payment. The DPA program covers that cost.
How about the closing costs?
Every mortgage transaction has closing costs. Most down payment assistance programs cover the down payment but not the closing costs. Closing costs can be covered with a seller concession, lender credit, or a combination.
Seller Concession and Lender Credit
Seller concessions are when a home seller increases the purchase price up to 6% on FHA and USDA loans, 3% on conventional loans, and 4% on VA loans. The inflated amount of the seller concession is given to the homebuyer to use as a credit towards closing costs. A lender credit is when the lender increases the rate in lieu of lending, giving a cash credit for closing costs.
Loan Origination Fees
Typically, 1% to 2% of the loan amount is charged to the client to go through the funding process and document the loan. Some lenders may cut or eliminate these costs if you access the DPA.
Appraisal Fees
This is ordered to identify the potential selling price for the house, unlike appeal fees, which seek to annul the set value. The average cost runs from $300 to $500.
Credit Report Fees
Lenders also charge an additional fee for obtaining your credit report, which is often between $30 and $50.
FHA Upfront Mortgage Insurance Premium (UFMIP)
This is based on what each borrower has applied for using FHA loans. Every borrower is charged an upfront mortgage insurance premium of 1.75% of the amount borrowed. This premium can be added to the loan or paid upon closing.
Some downpayment assistance programs may help fund this expense.
Title Insurance and Settlement Fees
The ensuing expenditures include those associated with changing titles and ensuring no title risks. These generally cost $500 to $1,500. These fees are relatively high.
Property Taxes and Prepaid Insurance
You will be required to pay in advance for property taxes and homeowners insurance for a specified period (often for 3 – 12 months), which will depend on the area’s property tax rates and the insurance cost. This may range from $1,000 to $3,000 or more.
Recording Fees
These expenses are for filing the sale with the relevant authorities. Depending on the location, they range from $50 to $200.
Escrow Fees
In some cases, an escrow company is used in the closing process. Depending on the company and the market, the specific company assesses escrow fees, ranging from $1,500 to $5,000.
Attorney Fees
In some states, you must have legal representation at the time of the closing. Such fees attract an estimate of $500 to $1,000.
Down Payment Assistance Fees (if applicable)
While some DPA programs do not charge a participation fee, some programs may require a participation fee that may differ from program to program. Depending on the program, these could range from a few hundred dollars to a few thousand dollars.
Pest Inspection (if required)
For FHA loans, some deep rural areas where pest insect infestation might occur may require a pest inspection. This examination goes anywhere between 100 and 200 dollars.
Discount Points & Loan Costs (if applicable)
When a borrower purchases a lower interest rate by paying discount points, Mr. R-machine notes that the charges are usually 1% of the loan amount for each point. This is optional, although it may form part of the closing costs.
Homeowner’s Association (HOA) Fees (if applicable)
When the property is in HOA, there are some joining fees or satisfying amount dues in advance. Depending upon the property, these may range from $100 to $500 or more.
Down Payment Assistance (DPA) Impact on Closing Costs:
The inhabitants of some DPA programs may also assist with some part of the cost, in this case, the closing costs, apart from paying or providing the down payment. This may differ from one program to another. So it is always advisable to check out what exact help is given for closing costs or just the down payment.
Closing Cost Estimate:
For an FHA loan (with or without DPA), the closing cost estimate(s) usually ranges between 2% and 6% of the house’s purchase price. For instance, in a $200,000 house, closing costs would be between $4,000 and $10,000.
Negotiating Closing Costs:
Seller concessions: It is acceptable for the seller to contribute 6% of the purchasing price for the closing costs since this is an FHA-approved financing option, and less money will have to come out of the pocket in this case.
Can I help you locate various down payment assistance programs or tell you approximately how much it might take to close the FHA DPA loan?