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Old 12-06-2016, 01:47 PM
 
Location: Summerville SC
851 posts, read 927,939 times
Reputation: 1273

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hello

The Seller has just accepted our offer of 189,900... we are going FHA

3.5% down should mean a Loan Amount of $183,253

The lender is quoting around $2,500 for an FHA Funding Fee.... how can this be right?

a google search has 2 conflicting answers for the Upfront FHA Funding Fee 2.25% of LA & 1.75% of LA

which is right?... neither equals $2,500

he also wants to bury it in the mortgage saying "there is no interest charged on the funding fee"

can this be true?.......... if so then 0% financing of the fee makes more sense than just paying it

the old rule of thumb was "3.5% down and 3% in closing costs" but he seems a lot higher than that

He is stating that this is a "0-0" "zero-zero" loan meaning no points or origination fee.... but the total closing costs are exceeding $7,000

any advice would be appreciated
thanks
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Old 12-06-2016, 02:10 PM
 
Location: Lending in all 50 states
198 posts, read 771,477 times
Reputation: 123
Quote:
Originally Posted by azsportpilot View Post
hello

The Seller has just accepted our offer of 189,900... we are going FHA

3.5% down should mean a Loan Amount of $183,253

The lender is quoting around $2,500 for an FHA Funding Fee.... how can this be right?

a google search has 2 conflicting answers for the Upfront FHA Funding Fee 2.25% of LA & 1.75% of LA

which is right?... neither equals $2,500

he also wants to bury it in the mortgage saying "there is no interest charged on the funding fee"

can this be true?.......... if so then 0% financing of the fee makes more sense than just paying it

the old rule of thumb was "3.5% down and 3% in closing costs" but he seems a lot higher than that

He is stating that this is a "0-0" "zero-zero" loan meaning no points or origination fee.... but the total closing costs are exceeding $7,000

any advice would be appreciated
thanks
Hi Azsportpilot,

The FHA Upfront MIP is 1.75% of your LA so in your case it would be $3,206.93 and that would make your loan amount after your dp $186,460.00.

Now as far the interest charged on the FHA Upfront MIP, this person is lying to you. Your monthly payment which includes principle & interest is based on the TOTAL loan amount so you are paying interest on the UFMIP.

Do you have a copy of your Loan Estimate?
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Old 12-06-2016, 02:22 PM
 
Location: Summerville SC
851 posts, read 927,939 times
Reputation: 1273
Quote:
Originally Posted by nmb30 View Post
Hi Azsportpilot,

and that would make your loan amount after your dp $186,460.00.


do most people finance the funding fee?

i suspect incompetence more then outright lying as he was unable to confirm if the fee was 1.75% or 2.25%

i have since found that it used to be 2.25% and apparently they lowered it

I do have a copy of the estimate
Attached Thumbnails
FHA Funding Fee????-loanest.jpg  

Last edited by azsportpilot; 12-06-2016 at 03:06 PM..
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Old 12-06-2016, 02:47 PM
 
Location: Scottsdale, AZ
2,139 posts, read 4,795,267 times
Reputation: 3236
The correct term is Upfront Mortgage Insurance Premium (UFMIP) and it is 175 basis points (1.75%) of the entire mortgage amount (rounded down). In your case $183,253 should require a MIP of $3206. If rolled into your loan, your loan amount will be $186,459 and you will pay interest on the entire amount. Perhaps the lender was just giving you a rough estimate.

If your lender cannot give exact numbers find a new lender.
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Old 12-06-2016, 03:00 PM
 
12,016 posts, read 11,268,259 times
Reputation: 13420
FHA funding fee sounds like a bank charge or origination charge for processing the loan. I never heard that term but I found it's the Mortgage Insurance Premium.

Last edited by LifeIsGood01; 12-06-2016 at 03:08 PM..
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Old 12-06-2016, 03:07 PM
 
12,016 posts, read 11,268,259 times
Reputation: 13420
Quote:
Originally Posted by AZJoeD View Post
The correct term is Upfront Mortgage Insurance Premium (UFMIP) and it is 175 basis points (1.75%) of the entire mortgage amount (rounded down). In your case $183,253 should require a MIP of $3206. If rolled into your loan, your loan amount will be $186,459 and you will pay interest on the entire amount. Perhaps the lender was just giving you a rough estimate.

If your lender cannot give exact numbers find a new lender.
Also .85% a year which is 1557 for the OP which is $129.80 a month
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Old 12-06-2016, 03:11 PM
 
12,016 posts, read 11,268,259 times
Reputation: 13420
Quote:
Originally Posted by azsportpilot View Post
hello

The Seller has just accepted our offer of 189,900... we are going FHA

3.5% down should mean a Loan Amount of $183,253

The lender is quoting around $2,500 for an FHA Funding Fee.... how can this be right?

a google search has 2 conflicting answers for the Upfront FHA Funding Fee 2.25% of LA & 1.75% of LA

which is right?... neither equals $2,500

he also wants to bury it in the mortgage saying "there is no interest charged on the funding fee"

can this be true?.......... if so then 0% financing of the fee makes more sense than just paying it

the old rule of thumb was "3.5% down and 3% in closing costs" but he seems a lot higher than that

He is stating that this is a "0-0" "zero-zero" loan meaning no points or origination fee.... but the total closing costs are exceeding $7,000

any advice would be appreciated
thanks
Closing costs are not a fixed amount. They include insurance premiums for a year or more as well as some prepaid homeowner taxes. If you buy a $50k home your closing costs can be 15% or higher. the higher the price of the home, it is usually a lower %.
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Old 12-06-2016, 03:15 PM
 
Location: Summerville SC
851 posts, read 927,939 times
Reputation: 1273
Based on the updated estimate he gave me with the corrected FHA Funding Fee it seems he will make just over $1,000 ($1,010.00 by my count)

this seems reasonable considering the Realtor will make $13,293..... but that's the sellers concern
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Old 12-06-2016, 03:17 PM
 
12,016 posts, read 11,268,259 times
Reputation: 13420
Quote:
Originally Posted by azsportpilot View Post
do most people finance the funding fee?
It's not a funding fee, it's MIP. It's paid at closing. You don't finance it unless you are adding the closing costs into the loan. You also have to pay MIP monthly about $130 a month in your case for the life of the loan. You should have been told, this is added to your mortgage payment.
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Old 12-06-2016, 03:18 PM
 
12,016 posts, read 11,268,259 times
Reputation: 13420
Quote:
Originally Posted by azsportpilot View Post
Based on the updated estimate he gave me with the corrected FHA Funding Fee it seems he will make just over $1,000 ($1,010.00 by my count)

this seems reasonable considering the Realtor will make $13,293..... but that's the sellers concern
It's not a funding fee and only FHA makes money on it. It's mortgage insurance.
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