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CAN I ROLL CLOSING COSTS INTO AN FHA LOAN?

I HAVE ENOUGH CASH FOR THE 3.5% DOWN, BUT NOT SURE ABOUT THE CLOSING COTS, JUST WONDERING IF I COULD FINANCE THE CLOSING COSTS.
  • February 07 2013 - Redlands
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Answers (12)

When I hear people say you never have to pay the money back on an NHF grant that is technically true, the grant money you get from the lender is a true grant, however the way they fund the grant makes it so that the buyer/homeowner does indeed pay it back. 

You know how they say "there's always a catch" or "free is never free"? In this case its true...

The NHF Platinum Grant program comes with a higher interest rate on the FHA (or other) loan than is otherwise normal for the market. Basically the buyer self-funds the grant by taking a higher rate and pays it back over time. Over a long period of time the buyer may end up paying much more than the amount of the grant back. 

So technically you don't have to pay the actual grant funds back, but you do start paying the lender back as early as your first payment through a higher interest rate. 

All that being said it is not a bad deal, if you were to buy and then refinance 7 months later you will undoubtedly get most of that grant money for free, not having paid much of it back through the higher interest rate/payment it comes with. But no one knows where interest rates nor property values will be in 7 months, so planning on that comes with some risk. 

This is why most of my clients choose the CalHFA CHDAP program. Lower monthly payments and you don'y have to pay the CHDAP back until you pay off the mortgage (often with no accrued interest on the CHDAP). 
  • May 01
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I agree, Clay is correct.

although there is also a program for FHA loans called an NHF grant. here

This provides down payment assistance available in CA and there are a few different programs to suit your needs.

use the assistance for down payment, free up more funds for closing costs. just another option!

and by the way, you NEVER have to repay the free money loan... good luck!
  • May 01
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lentz1161,

Generally speaking you apply for this through the lender you use, rather than the agency that issues the funds. 

Here is what is probably the most common one in California: CalHFA CHDAP

Please let me know if I can assist you in any way. We do a lot of these and they are quite easy to do if you qualify.

Sincerely,
Greg
  • May 01
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Profile picture for lentz1161
Does anybody know what the name is or have a link to the program to apply for closing cost assistance for an FHA loan? Thank you!
  • May 01
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Profile picture for Juan Castro
Greetings, Might I suggest that you consider asking the seller to contribute towards your closing costs. If you are already under contract working toward closing once the appraisal is completed you can then see if the home appraised for more that the purchase price and try to roll the costs into the loan. Basically the seller would credit you back the balance at closing to cover those fees. Keep in mind that most banks will have limits for how much a seller can contribute, likely about 3% to the buyer. If you do not have the property under contract yet, simply have your local agent make it a condition of the agreement while negotiating.
  • February 12 2013
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Hi,

If you are a first time home buyer there are many first time home buyer programs out there that provide funds depending on location and income. The funds can be used toward down payment and closing costs depending on how much you'd qualify for.

They essentially act as a second loan and must be paid off when you sell your home.
  • February 12 2013
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No, you cannot finance closing costs (aside from the Up Front MIP) on an FHA loan when you are only putting 3.5% down, but you may be able to have another party pay for it.

As mentioned below the lender, seller, or Realtor can pay closing costs for the buyer. but there are also down payment assistance programs here in California that can help with this. Not everyone will qualify for these programs but they are out there and we help many people with them every day.

There is also some USDA eligibility around Redlands. If the property is in an USDA eligible area you may qualify for 100% financing, so you could use your own money to pay closing costs, and even though the loan amount will be higher your monthly payment should be lower with a USDA loan than with an FHA loan due to the huge difference in the mortgage insurance on an FHA loan.

Just some thoughts and ideas. Hope this helps a little. 

Sincerely,
Greg

Mortgage Advisor - 16 Years Experience
Partners Mortgage
  • February 08 2013
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Clay gave the only correct answer.
  • February 08 2013
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No, you can not add Closing Costs / Prepaids in the loan amount on an FHA purchase loan / 3.5% down payment.The only fee that can be added is the upfront mortgage insurance. What you can do is negotiate the expense to be paid by the seller or your lender by raising the interest rate or a combination of both. You need to find a lender before moving forward from here, they will explain how this works but the bottom line is all expenses can be covered so that you only need the 3.5% down payment. 
  • February 08 2013
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Profile picture for JoshBarnettREIB
Yes and your Realtor can go over the ins-and-outs of this, which you can then confirm with your lender who should have already gone over this with you.  

Best of Luck.
  • February 08 2013
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Profile picture for Bkgdc
You may roll closing costs in the loan, however, you must put at least 3.5% down.  Keep in mind, the more you roll in, the larger your monthly payment will be.  A better option is to get a seller concession/credit.  If you are in a buyer's market, it should be easier. If you are in a seller's market, it will make your offer less attractive.
  • February 07 2013
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Profile picture for Mortgage Center Corp
Yes, you can but you should try to see if the closing costs can be paid by seller or even using lender credits!
  • February 07 2013
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