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Need Help with HUD HOME bid and loan info given to me?

Submitted a bid of 166K to purchase this HUD HOME(case number 495-912728),but don't know much of about the bidding-loan process and I want to know if what my loan officer is telling is correct or if he's trying to screw me over. My FICO score is an 806, I'm a registered nurse,my debt are current grad school loans of 9K and current mortgage of 31K. I want FHA on this loan and he replied with this:"Thanks for the initial information you have provided us to work with. FHA loans are 3.5% down payment and allow the seller to pay up to 6% of your closing costs. On HUD FHA the seller can pay up to 3% of your closing costs. Your gross income per month is $5297.FHA debt ratios are 43%. 5297 x 43%= $2383- $573(Your mortgage)= $1810. This would be basically for a home of $192,000 and less that you may possibly qualify for.The other loan you may consider is a Conventional 30 year fixed loan. It is a good loan if you plan to put at least a 5% down payment and have credit scores over 680 (Preferably over 720).Thanks for your time and the opportunity to work with you and serve you."----- is he lying about HUD FHA only being allowed to pay 3% of closing costs? He did say on FHA loans the seller can pay 6% of closing costs? So which is it? Am I being misinformed? On the Texas Conditional Qualification Letter he gave us it says Qualifying Interest Rate is 4.5%? If I were to win this bid for this HUD HOME, am I locked into this rate because if that's the case I don't think that's the best rate as I quickly googled FHA RATES and I've seen some for 3.65% for the same FHA 30 yr fixed he quoted. Should I change loan officers if I win this home? Should I be getting a better rate based on my FICO score? Sorry if I sound like an idiot but I'm new to this and this lingo and just want to be well armed and informed so that I won't be taken advantage off. Any and all help is greatly appreciated guys! Thank you!
  • January 06 2014 - US
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Answers (3)

The "qualifying rate" is the rate that was used for making sure you're qualified. The actual rate can be different. The fact that the LO was uncertain whether you would go FHA, or conventional, makes this rate seem sensible. You definitely don't want to use a rate that is lower than what may be necessary, for qualifying. In other words, the qualifying rate is often bumped an eighth, or more, to make room for potential rate increases during the process.
  • January 06 2014
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When I purchased my first home that was also a HUD Home I purchased it for just $100 at closing.. how come my loan officer didn't mention this?
  • January 06 2014
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Hello, I am a HUD certified agent that can help you about the truth of the matter. The lender told you correct about the Closing cost being covered by HUD. FHA does allow up to 6% covered by seller but HUD is differant and there rule is they will only cover 3% of your closing cost. HUD has there rules they stick by. As for changing loan officers, Try getting their fee sheet on what they are charging you. Then take that to call on other lenders to shop.  A good Morgage Banker can tell you just by looking at the fee sheet and you telling them your scores, if they could beat it. If you find that someone else can beat your current lender ask if they will match it before you change lenders. I hope that this helps and you are working with an agent who understands how HUD works.
  • January 06 2014
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