Karen K, Home Buyer in Huntington Beach, CA

FHA loan 3.5% downpayment. Are there also closing cost that must come out of pocket?

Asked by Karen K, Huntington Beach, CA Sun Feb 15, 2009

Help the community by answering this question:


Hi Karen,

The 3.5% down payment can come from you or can be a gift from a relative.

There are closing costs which average about 3%-ish on top of this. But this does not need to be out-of-pocket. What we do is "finance" the closing costs when we write the offer...I normally recommend this anyway, why not have more reserves!

Let's take an example:

If you find a home that you are willing to pay $200,000 for. Let's say closing costs are $10,000. We will write an offer for $210,000 and then ask the seller to "pay" $10,000 for our closing costs. Does this make sense?

The down payment will be $7350 (3.5% of $210,000) and that can come from a gift from a relative or your savings.

Hope this helps...let me know if you have any other questions.

3 votes Thank Flag Link Mon Feb 16, 2009
Thanks that even helped me out a lot with my question. Thanks for sharing. Judy
Flag Tue Jul 23, 2013
Hi Karen,
According to my preferred lender, the entire 3.5% down payment can be a gift from a relative or friend, and all the closing costs can be paid by another party - other than the buyer - as well. If that is accurate it would appear that someone - with the right connections - can still purchase a property with no money down - up to $417000., perhaps even higher.
By the way, as I answer questions about many areas, on this Forum, I don't work in Huntington Beach, as a rule, so I am not trying to solicit your business, in that community.
If you, or a friend of yours, decides to buy or sell in South County, then, with 32+ years of local experience, I would be honored to be able to assist you or them. Good luck in your search!
Web Reference: http://BobPhillips.net
3 votes Thank Flag Link Sun Feb 15, 2009
Hello Karen, you may qualify to buy with minimum out of pocket expenses with premium financing that cover your closing costs...

You may qualify to buy FHA with fico scores between 500-579 with 10% down or minimum 580 fico score may qualify FHA 3.5% down or as low as .5% half percent down payment program. You may consider 3% down conventional from a minimum 620 fico score.

You will need to be pre-approved if you decide to buy to be able to meet an agent to view and submit offers on any homes of your choice. Your qualifications will be determined by your credit profile, debt to income ratios, fico scores, home price, loan program and how much you want to invest into the down payment and closing costs.

If you figure out what cities/zip codes you are considering, minimum number of bedrooms and the maximum payment/price you are looking to achieve you can be emailed listings to fit your search criteria. Your email address is needed to set you up for the automatic daily updates.

It only takes a few dozen questions to qualify, go over your options and email you listings to study and compare. Here are some links to study as well as web reference links to many loan program pages offered...

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If my response was helpful, consider clicking Thank, Link or Best Answer.
2 votes Thank Flag Link Sun Apr 26, 2015
All you agents that inflate prices by rolling in closing costs are going to screw upp the market again. Way to go!
2 votes Thank Flag Link Tue Jan 10, 2012
I highly doubt it's the agents. More than likely the purchasers, who are the ones actually asking for closing costs.

I'm a Realtor in a market that still has 100% financing, and have buyers not bringing a dime to closing, and actually getting their full earnest money deposit back.
Flag Sat Jan 12, 2013
Hey Mark H, last I checked Realtors don't set lending guidelines, so maybe redirect your frustration to the correct source.
Flag Wed Jun 20, 2012
Hey OC, the rules changed as of Jan 1st this year. Closing costs are no longer allowed to be part of your 3.5% investment into the home. You now have to come up with 3.5% down payment (can be savings, 401k withdrawal, gift from family,etc) and money for closing costs and prepaid items. The seller,however, is allowed to contribute up to 6% of the purchase price towards closing costs,points, and prepaid items. This 6% cannot go towards down payment though.

Check http://www.hud.gov to find out maximum mortgage limits in your area. Then align yourself with a good local lender to get approved and a good buyer's agent to find the right home and assist you with structuring your offer

Good luck!
2 votes Thank Flag Link Mon Feb 16, 2009
Tony, I have question I hope you help me with. I'm going through the FHA process but I believe I made a huge mistake. All of my down payment is in the back which was from my tax return and saving 3.5% I also have to pay part of my closing cost which I was short about $200 I used a pay check advance that my bank offers. What would you say my % of Denial are?
Flag Tue Apr 15, 2014
FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.

More information: http://fhamortgageinfo.com/
1 vote Thank Flag Link Wed Jul 22, 2015
I have covered closing costs many times in just the way karen described and it is perfectly legal. You can do this with FHA with no problem.
1 vote Thank Flag Link Tue Feb 17, 2009
what are the closing costs on a 3.5% down and purchase price $106,000?
0 votes Thank Flag Link Fri Sep 4, 2015
There is a program that I use that provides 10,000 towards your down payment and closing costs. It is a zero interest and zero payment loan that is only due when/if you sell the home. I have closed using this program several times and would be happy to assist you. Also I use a 2,000 tax credit program, which enables you to receive a 2,000 tax credit for the life of your loan.

1-Must not have owned a home in 3 years.
2-Must have been in the same line of work for 2 years
3-Must make more than 25k but less than 80k
4-Must have 1,000 to put into the deal.
5-640 minimum credit score.

Contact Andrew 954-394-7185 Text first Please!!!!!!!
0 votes Thank Flag Link Thu May 28, 2015
My closing cost is 10,96.00 I only have 6,000 An I close may 15th where can I get the rest a gift no one out there will give that what to do?
0 votes Thank Flag Link Sat Apr 25, 2015
I am buying a house in Coopersburg,PA for $525,000. Would I be able to get a FHA loan with a 3.5% down?
0 votes Thank Flag Link Wed Sep 11, 2013
I am currently purchasing a property in SOCAL and I just signed my paperwork for a FHA 3.5% down
payment, Now this is a first time for me to go FHA. But, We have about 90% of our closing costs paid for us, NOT by the Seller, but by going FHA. So, If you read the FHA Guidelines it does say that you can have most of your closing costs paid for. And, No we are not putting this into or Loan either.
0 votes Thank Flag Link Mon Oct 15, 2012
I'm buying a house now with FHA. That 3.5% they tell you is a straight up lie. That person that claims you can add $10,000 to your loan and pay 3.5% is not telling you the whole truth. You can only add that $10,000 if the home actually appraises for $210,000. Think about it. They're not going to loan you $10,000 more if you don't have the assets if you turn around and can't even pay the first mortgage after close. They have to have some security.

They do, however, help you up to the appraised value. Total closing costs is usually around $11,000 with FHA so they basically lie and say 3.5%. How many times you will actually buy a house that is FHA approved that appraises for more than what the seller is selling for?

Also, that good faith estimate? It will go up. Even when it seems like it's going down. They will slam you right before the closing. My closing cost was down to little over $300. My husband and I have made plans with the left over money we had after we pay this closing cost. Now the new estimate right before closing is $3000. That is after insurance and all kind of fees I have paid. Now we have no money left for any furniture for the house because we were naive like everyone else thinking we only had to pay 3.5% There ought to be laws against what they do.
0 votes Thank Flag Link Wed Jun 20, 2012
Hello Karen,

Yes, the buyer does have closing cost. You can however ask the seller to pay a portion of the closing cost for you. This of course will be up to the seller to decide if they would like to help you.

Keep in mind if you write an offer on a short sale the seller will not most likely be in a position to help you with cost as they themselves are not in the best financial position.

You can also get a "gift" from friends or family to help you with cost. The giver will have to write a "gift" letter which simply confirms they are "giving" you the funds with no expectation of repayment.
(it can not be a loan)

Best of luck to you!

Kawain Payne, Realtor
0 votes Thank Flag Link Wed Apr 25, 2012
Hi My name is J Cordova

Im buying a new townhouse in parkland florida, through centerline , Im since Im first time buy Im doing FHA 3.5 which is 3.9 now , the seller told that they were gonna give me $8000 as insentive for closing cost , I gave my 3.5% of my buy which is $279.00, now they do not want to give me the credit towards the closing plus they say if I dont buy I will loose my $10.000, that I gave for the 3.5 as FHA , there anything that I can do? I dont want to loose my money , the credit that they were gonna its on a paper that the agent gave thks
0 votes Thank Flag Link Wed Apr 11, 2012
Rob Weber,
Thanks for your respond I will do
Flag Sat Apr 14, 2012
J Cordova,

You should seek the advice of a Real Estate attorney immediately. Your question is a legal one and none of us are qualified to give you legal advice (there are a few very rare attorney's who respond on here). Unfortunately I don't know any attorney's in Coral Springs or I'd provide a referral. I wish you the best of luck, feel free to email me if you have questions though I can't guarantee how much help I'll be not being able to answer the legal questions you need assistance with.
Flag Wed Apr 11, 2012
Yes, there are closing costs, they do not need to come out of pocket.
We do have loan programs with no closing costs. The seller can also pay your closing costs.
You have to negotiate that when you make your offer. We do loans all the time where the only thing the people pay is the 3.5%
0 votes Thank Flag Link Fri Mar 9, 2012
If the seller doesn't credit you for closing costs, the closing costs can range from 1.5%-3% of the purchase price. The lender can also structure your loan to pay some or all of your closing costs.

A list of common closing costs:
-loan underwriting fee
-escrow fee
-title insurance
-12 months of homeowners insurance
-3-9 mos of property tax and insurance escrow impounds (depending on when in the year you close)
-next installment of property taxes (if you are within 60 days of property tax due date)
0 votes Thank Flag Link Tue Feb 14, 2012
Ask lender if they would pay your closing cost.
Web Reference: http://www.homenet123.com
0 votes Thank Flag Link Tue Feb 14, 2012
Check with a lender in your area. Certainly in our neck of the woods, it is possible - and legal, to bump up your interest rate and have the lender pay your closing costs. Property values are not affected becasue you are effectively "paying for the home" and not rolling closing costs into the purchase price. In my experience monthly payments were only slightly higher.
0 votes Thank Flag Link Sat Feb 4, 2012
Yes.. These fees vary based on the purchase price state, city and county..

You could call a local title companies to ask what the average fees in your area are to close.

In Miami, FL more or less it's about 2.5% of the purchase price needed to close.

Here is a list of just a few fees charged at closing: Recording Fee, Wire and Courier Fees, Endorsement Fee, Title Closing Fee, and Title Document Prep Fee
Web Reference: http://www.SLeonRealtor.com
0 votes Thank Flag Link Thu Feb 2, 2012
Yes there are additional closing costs. As an agent I always try to get the seller to pay these for the buyer.

If you are in California there is a down payment assistance program that will give you 3% if you qualify for it as well.
0 votes Thank Flag Link Tue Jun 16, 2009
OK, ladies, I understand. And agree. I HAVE done it before. What I took exception to, was the fact that Karen left out the possibility that the "list" price may have been higher. Of course you can "build" things like closing costs into a price - IF - the ultimate or eventual sales price is able to meet an appraiser's criteria.

In today's local - South Orange County - market, where houses in the $200,000. price range are greeted by multiple offers, and eventually selling for MORE than listed price, most sellers aren't open to making concessions, or paying closing costs - so, back to the original question - in my humble opinion it is better to line up potential gift scenarios before making offers, rather than expect a seller to go along with a scheme.
Web Reference: http://BobPhillips.net
0 votes Thank Flag Link Tue Feb 17, 2009
Here is a site for FHA....you can learn about FHA financing here and seller concessions. Actually they have been raised from 3% to 6% of the selling price...which is great for first time home buyers who are trying to get into a home for very little out of pocket costs.

Best wishes,

0 votes Thank Flag Link Tue Feb 17, 2009
Oh Bob...

This is very standard proceedure. I'm surprised you don't know this! Lenders are quite used to seeing seller concessions on all offers, but you do know this!

In my example...I am obviously not talking about a home that is only "worth" $200,000 but one that might be listed at $225,000 or $210,000. But you know this...if not, I would recommend that you talk to your lender of choice, your clients might be using valuable cash reserves for closing costs when it's not necessary.

Best wishes,

0 votes Thank Flag Link Tue Feb 17, 2009
Great answer Tony!

As for Karen's answer, I nearly spit out my coffee when I read her statement: "If you find a home that you are willing to pay $200,000 for. Let's say closing costs are $10,000. We will write an offer for $210,000 and then ask the seller to "pay" $10,000 for our closing costs. Does this make sense?"

Karen, it probably will NOT make sense to an appraiser. SOME lenders might even call it fraud.

Any or all the down payment, and ALL closing costs, in an FHA loan can be a gift. Yes, some of that CAN be from the seller, but that isn't too wise if it raises the price, and the appraisal doesn't come in.

Structuring costs to over and above the real value of the property is not usually a good practice. If there is enough flexibility in the price, then fine, ask the seller to pay costs or "buy down" the interest rate, but the house still has to appraise.
Web Reference: http://BobPhillips.net
0 votes Thank Flag Link Tue Feb 17, 2009
Karen's statement was assuming that there was enough "Flexibility in the price" , I think you are being critical of her kind gesture in trying to answer a question for someone who needed advice on how to get help paying closing costs, but, I'm with Karen on this one, you know EXACTLY what she meant, so why are you trying to make this NICE WOMAN appear to be misleading. You are the FRAUD in your comments!!!
Flag Wed Sep 12, 2012
Hi Karen, good explanation of how to get the the seller to pay the buyers closing but making sure the buyers still have their down payment. Thanks!
0 votes Thank Flag Link Mon Feb 16, 2009

This link may help answer lots of your current and future questions.

0 votes Thank Flag Link Mon Feb 16, 2009
There are closing costs, as with any mortgage, BUT you can ask the seller to pay them. I would sit down with a mortgage broker.

I can help with your mortgage!

I am a mortgage broker. If I can be of service, please let me know!

Martin Smith

Precision Funding
877-238-6324 Ext 704
877-238-6324 FAX
0 votes Thank Flag Link Mon Feb 16, 2009
We have some friends who did the 3% down FHA loan last year and they did have to pay the closing costs out of pocket.... ie they were not rolled into the loan. These consist of the property tax due between closing of escrow and the next period, which would be July 1st. The closer you are to July 1st, the less that will be due. Also, you have to prepay the mortgage interest from close of escrow to the first payment due. If you close on April 15th, the first mortgage payment will be do on June 1st, but on April 15th you will pay the interest from the 15th to the 30th. So here, the closer you are to closing at the end of the month, the less it will.

Lastly, you have all your loan fees, which your good faith estimate will provide you.

All total, closing costs are generally 2 to 3%.
0 votes Thank Flag Link Mon Feb 16, 2009
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