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Yes it's still possible if you have at least 1.75% credit and it's structured correctly. Most loan officers just show a blanket credit and that won't cut it in your case. They would end up applying the credit to all the other closing costs first and then you would be left with a partial amount for the UFMIP and that's not allowed. As long as it's clearly applied to the UFMIP on the HUD and it covers the full amount you will be able to do this.
Have you spoken to the lender you are using? they should be very helpful to you in answering all your questions and the agent you have working for you..
Yes it can be used as apart of your closing costs.. There are many items that can be apart of the closing costs.. There is however a max that lenders will allow 6% and also if the seller is giving you a credit for repairs it can not be over a certain amount either.. This one gets over looked .
Good luck in your purchase..
Ingrid Ski Realtor
First, be careful in your seller's credit in that FHA only allows up to 6% of the sales price. As for the FHA funding fee, it is considered a cost of doing an FHA loan and it is possible to pay for it where as they do not finance the amount into the loan. Also buying down your rate with discount points is also feasible. As mentioned, just keep in mind that your closing costs do not exceed the seller's concession of 6%. If you have any questions, you always reach me directly as well. We are a direct lender.