What (If any) Closing Costs Can Be Rolled Into FHA Mortgage

[Anonymous]

Hi All,

After 2.5 years of hard work at cleaning up our credit, we were pre approved for our mortgage a couple of weeks ago.  We found a house this weekend and spent 4 hours last night going from offer to counter offer to finally being under contract! 

We have saved enough for our 3.5% of the down payment.  The house price we agreed to was $268,000.  The seller agreed to pay 3 points in closing costs.  Our concern is that may still leave us with needing to coming up with another $8K+ in cash at closing.  Can any of our closing costs be rolled into the mortgage?  We are doing an FHA 30 Year Fixed Rate. 

Looking for any direction/expertise!

Thanks!

[Anonymous]

No, you can not roll the closing costs into the loan.  You will have to come up with it, and the funds will have to be verifiable.  One thing to be concerned about is that you have put in an offer without the funds to close available.  This may mean that if the deal falls through because you can not source the money, you may loose your earnest deposit.  I do not think that would fall under the financing contingency (but I could be wrong).  You could try to contact the sellers and see if they would go up to 6% (FHA maximum) and add it to the home price, but now that you have already signed they may not do this.  Also, the home would have to appraise high enough to cover the total loan amount including the closing costs added in.  Int his market that is tough to do generally.

Good luck with it.

[Anonymous]

Thanks for getting back to me.  Our family is willing to gift us the money for closing costs which is why we were comfortable going into contract.  I was just looking to see if there was anything I could do with rolling closing costs into our mortgage so that they wouldn't have to put up so much money.  We are getting married in the next year and I know they will be helping some with that too, so I didn't necessarily want to look a "gift horse in the mouth".

As for asking for 6% from the seller, from what I've read on the FHA website and according to my mortgage consultant, the rules have changed and under an FHA mortgage you are only allowed to ask for 3% from the seller towards closing costs.  Apparently sellers were inflating their asking prices to cover the 6% so FHA changed their rules to prevent it.

Thanks for your help!

[Anonymous]

the 3% rule was announced, but has not gone into affect yet I beleive.  That said, the individual banks may already be going that route for both underwriting purposes and to get ahead of the rule change.

As far as inflating the prices, that was my point about the appraisal.  Alot of people did inflate their home prices, but that is getting harder to do since they have to prove comparable sales to get an approval so unless the house is going for 6% under the current real market value, you will not get a high enough appraisal.  Same threory applies to the 3% as well.  IT still has to appraise high enough for that to work out for you.

[ShanetheMortgageMan]

3% of that sales price is $8,040, which typically is enough to cover the closing costs in most areas.  Are you in a high closing cost state such as NY, PA, MD, DE, FL, etc.?

[Anonymous]

I'm in IL and it looks like it more than covers my closing costs which is fabulous!  I was thrown off by the initial fees worksheet which didn't physically state my down payment as a line item.  Because of that I thought the closing costs were an additional amount on top of the down payment.  However, as you can see from my earlier post, the IFW actually does take into account my down payment.  Therefore, I am good to go and may even come out ahead since we still haven't taken into consideration the seller tax credit.

Breathing much more easily now!