Financing in Orange>Question Details

CPbronco, Home Buyer in Orange, CA

Is the FHA funding fee considered a closing cost? If it is I would like to use the sellers credit to pay for it instead of adding it to the loan.

Asked by CPbronco, Orange, CA Mon Jun 25, 2012

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The FHA Funding Fee is the upfront cost and monthly premium you pay when you get a mortgage guaranteed by the Federal Housing Administration (FHA). The upfront fee, also called the upfront mortgage insurance premium (UFMIP), equals 2.25 percent (subject to change) of your mortgage amount. The monthly insurance premium (MIP), a different percentage, is added to your mortgage payment. Monthly MIP Funding Fees are calculated a bit differently, but the math is relatively easy.

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2 votes Thank Flag Link Thu Jul 23, 2015
While it really is a closing cost, most loan officers do not quote it as one. I looked this one up and from what I could find t here really was no reason why you could not do that. But it will drive the loan processors nuts because they have not seen it.
0 votes Thank Flag Link Mon Apr 15, 2013

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.
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0 votes Thank Flag Link Mon Jun 25, 2012
I pretty sure the sellers credit will not cover the entire amount (closing costs + funding fee) there is about 1500 left to pay and was planning on paying it out of pocket. Still possible?

The sellers credit is far less 6%.
0 votes Thank Flag Link Mon Jun 25, 2012
You can do that if you have enough of a seller credit.
0 votes Thank Flag Link Mon Jun 25, 2012
Great give me a phone call, love to share your ideas and submit your loan in this way!

Steve Butera,
Hamilton Group Funding 561-809-5377,
nmls 222435
0 votes Thank Flag Link Mon Jun 25, 2012
You may use the seller credit to pay the FHA Up Front Mortgage Insurance Premium (UFMIP), however, you have to make sure it's enough to pay all of it. The seller credit or remaining seller credit has to cover the entire 1.75% since partial payments to the UFMIP are not allowed. I mention this because I've seen cases where poorly structured loans were rejected because the seller credit was not specifically delegated to certain closing costs.
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0 votes Thank Flag Link Mon Jun 25, 2012
Hello CPBronco,

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
0 votes Thank Flag Link Mon Jun 25, 2012
Absolutely it is considered a closing cost and yes you may use the seller's credit to pay that up front mortgage insurance. That is very wise as you will not be paying interest on the insurance over the next 30 years!! Great question!!
0 votes Thank Flag Link Mon Jun 25, 2012
Hi CP,

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.
0 votes Thank Flag Link Mon Jun 25, 2012
I forgot to add. In the same regard, is buying points considered part of the closing cost? My intention is to use as much as possible of the Sellers credit to closing costs.
0 votes Thank Flag Link Mon Jun 25, 2012
Simple. YES. Buying points is simply paying a higher rate so the lender can credit back miscellaneous fees for closing costs. BE CAREFUL. You many not need to do that. Give me a call. Here at Broadview we go even further and have an additional $3,000 Buyer credit that can also be used, and it DOES NOT raise your rate or costs. We are local here in ORANGE also, so why don't you stop by and we can make sure you are getting the most awesome loan you can get. We know the realtors in the area too so what a deal! Call me at 714-455-9150.
Flag Wed Jun 27, 2012
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