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Closing cost funds

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Closing cost funds

I was wondering if anyone could specify with an FHA loan if closing cost funds have to be verified before approval or before closing?

 

We weren't intending on paying much in closing but the seller would only contribute so much. Also, I have been given different answers on reserves for FHA loans. Are they required on every loan or only certain credit files?

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Valued Contributor

Re: Closing cost funds

The closing cost changed for me after my approval so I am not sure if this is State sensitive but mine didn't need it until around Closing Smiley Happy













((This needs to be updated just added new card))INQ's: EQ: 6 TU: 1 EX: 0 (last 24 mo.)
Recent Accounts: 7-that caused inquires (last 24 mo.)
Total CL: 14.8k Util. LOL% AAoA: 1 yrs, 4 mo.
AoOA: 5 yrs, 2 mo. AoYA: 0 yr, 3 mo.--I think I did the AA/Ao's Right LOL
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New Contributor

Re: Closing cost funds

Thanks, Girlzilla..I'm sure every lender or loan type is different but I'm hoping this is the case. Did you finance FHA by chance?

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Established Contributor

Re: Closing cost funds

Reserves for FHA loans are a "new guideline requirement" going into effect for new case files after Feb 10, 2020 with credit scores between 580-619....

 

Regarding your closing cost funds question.....it's best you clarify with your LO, but it's probable that ANY lender wants to see the source of all funds you are using for your MRI (Minimum Required Investment--3.5% down payment) and any out of pocket expenses that you'll be paying.   (Closing costs, Inspections, pre-paid escrow items such as taxes and insurance, etc.)

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Licensed NC Mortgage Loan Originator
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New Contributor

Re: Closing cost funds

Thank you that's what I have been reading but it was more along lines of a 640 score or more for no reserves. Thank you for clarifying that.

 

I am trying to find a lender with lender credits. My current one says absolutely no credits and we can't roll anything into the Loan but I have read the Mortgage Insurance Premium can be rolled in. This must be just their overlay I have seen so many people do the MIP that way for FHA.

 

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Established Contributor

Re: Closing cost funds

Obtaining Lender Credits comes at the cost of a higher mortgage note rate and could vary from lender to lender.   You might want to ask around. 

 

For example, at my company, I have my commission structured so that I am offering rates below FNMA's and Freddie Mac's National Average so that I'm not going to lose many deals to any competitors over rate.   I lose deals because I am ugly, but not because of my rates. 

 

Nonetheless, today's FHA rate on a $150,000 purchase (your down payment of $5250) might be 3.625% with an APR of 4.801% and your monthly P&I payment is $672.   Here in NC your monthly taxes and insurance would be roughly $200 and the monthly Mortgage Insurance Premium payable to HUD is $102 per month for the first year.  The Up Front Mortgage Insurance Premium that is paid to HUD is 1.75% of the base loan amount of $144,750 or $2533 which can be added to your loan amount.    

 

You could accept a higher interest rate of 3.75% or 3.875% and we might offer you 1% of the loan amount or $1400 in lender credits for you to use to reduce your closing costs.   Your monthly P&I payment might be $10-20 higher depending upon which rate you selected for your loan as well. 

 

Conversely, you might want to pay 1%to buy the rate down to 3.375% or 3.5% depending upon the "market" but hopefully this all makes more sense. 

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Licensed NC Mortgage Loan Originator
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