FHA Funding fee

Asked by John, Pennsylvania Sat Sep 13, 2008

My friend is settling on a house next week and his credit score is in the 540's. He is getting a FHA loan around 170K with 5% seller assist and 5% down. The mortgage broker says his credit is bad and can only give him a loan with a FHA funding fee and with 1 point. He has asked me to ask anyone I know if these are true 'fees'. I was hoping the collective knowledge of trulia could help me find him an answer. Specifically, I was wondering if anyone would please mind sharing a list of mandatory and optional fee list for a FHA loan with the above specs in Philadelphia, PA. Is there a minimum/maximum FHA funding fee and is this negotiable. Thank you in advance! John

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16
, ,
Wed Jul 14, 2010
And by the way Biglove, it isn't called a funding fee on FHA, that is with a VA loan. It is the up-front MIP fee.
1 vote
, ,
Wed Jul 14, 2010
Biglove, back in 2008, when this question was asked, many mortgage brokers were not very familiar with FHA because they were just becoming popular again. Before that, we had all sorts of piggy-backs we could do so there was no need for FHA. I am sure that Bob now knows that FHA has a funding fee. However, seeing as you were rather insulting to him, I will tell you that you don't know to read the date on the original question. Besides the fact that someone else might read this and think that someone with a 540 credit score can still get an FHA loan.
1 vote
Chris & Step…, Agent, Philadelphia, PA
Sat Sep 13, 2008
John,

It seems that there are 2 good answers already. I agree with the prior poster that some upfront would be applicable. The flip side is that I would be grateful (maybe even do jumping jacks) if I had a 540 credit score AND COULD EVEN GET A LOAN TO PURCHASE A HOUSE to begin with. So as long as it is reasonable, it is amazing that the deal is going through at all. Thank the government for FHA, for without FHA in this market, very few homes under 150K would be sold at all. Is a great program. Unfortunately, some of these properties become HUD properties later on.

Good luck to your friend.

For more helpful hints, visit our website below !
Web Reference:  http://www.thesomersteam.com
1 vote
Bob McClure, Other Pro, Walled Lake, MI
Sat Sep 13, 2008
good evning john...there is no such thing as an fha funding fee...what they are referring to are loan origination and discount points...typically, with a credit score at that level........there are pricing hits which yields less profit when selling the loan....in that case some upfront costs are usual......i am very fair with my pricing...but i too would have to charge something on the front end in order to make anything at all on originating the loan..if he's getting an fha loan with that score...he's very fortunate.... but understand that a 700 plus fico score can get a little better deal than a higher risk fha borrower can....the pricing hits are something that is a recent change....i hope thta helps...bob mcclure- mortgage now- farmington, michigan.... licensed in 19 states including yours.....
1 vote
Maya Thomas…, Agent, Key West, FL
Sun Aug 8, 2010
Hi Robin,
My deepest apologies to you for answering an old question that someone else asked.

I didn't say that the point was a requirement.

Nice meeting you and best of luck!
0 votes
, ,
Sun Aug 8, 2010
Yes Maya, but this question is 2 years old. What is not true, whether it was 2 years ago, 10 years ago, or today, is that there is never a requirement that a borrower HAS TO PAY 1 point.
0 votes
Maya Thomas…, Agent, Key West, FL
Sun Aug 8, 2010
Hi Robin,
Thank you for your interest. I read the question. John asked if all of the fees were "true fees."

You must be a lovely person to work with. It's a good thing you are here to keep everyone in their place for John.
Maya
0 votes
, ,
Sun Aug 8, 2010
Maya, are you just answering, or ready the other replies?
0 votes
Maya Thomas…, Agent, Key West, FL
Sun Aug 8, 2010
Is the point an interest buy down? A few banks I work with charge the 1% and are wiling to allow the buyer to take the higher interest rate so there is less money up front. Over the 30 year term of the loan the cost of the higher interest rate could cost a buyer 10 times as much as the 1% up front fee.
0 votes
Biglove, , Phoenix, AZ
Wed Jul 14, 2010
Yeah. Maybe I was too harsh. Sorry Bob. That's what happens when your 8 months pregnant and moody.
0 votes
Biglove, , Phoenix, AZ
Wed Jul 14, 2010
Dear Bob McClure, I am not sure how you are calling yourself a mortgage broker or lender when you said there is no such thing as an FHA funding fee. There absolutely is and it is mandatory on ALL FHA loans.
0 votes
Wa Macdonald, , Pittsburgh, PA
Fri Aug 21, 2009
The FHA funding fee is mandatory. I have a page on my web site that will calculate the FHA funding fee & provides more information.
0 votes
Scott Godzyk, Agent, Manchester, NH
Mon Nov 3, 2008
his credit score actually seems lower than what fha will accept. yes there is a fee for credit that is under 700/740. To be sure he can always contact another local mortgage company for a comparison. FHA does have a mandatory fee as well as preapid PMI. The offer he is getting doesnt sound that bad.
Web Reference:  http://www.ScottSellsNH.com
0 votes
Adel Manuel, , Pewaukee, WI
Mon Nov 3, 2008
All FHA loans have what they call "Upfront Mortgage Insurance". This is what that funding fee. It is charged on EVERY FHA loan. The fee is 1.75% for purchases and refinances with the sole exception being FHA to FHA refinances. Then the fee is only 1.5%. If you are refinancing a delinquent FHA loan, the fee is 3%. This money goes into a pool of money that FHA uses to pay defaults. This is not a fee your lender gets to keep. They will also not to bring this money to closing. It gets added to the loan size. I am embarressed that these other "mortgage professionals" did not know this. I hope this helps.
0 votes
Dale Archdek…, , Philadelphia, PA
Sun Sep 14, 2008
Hi John, great answers so far, and I agree your friend is very lucky to obtain financing with challenged credit these days. There is one mandatory up front fee for FHA though that the mortgage broker for your friend might be referring to. That is an up front mortgage insurance premium (MIP) of 1.5%. Unlike conventional financing, FHA requires a 1.5% mortgage premium to be paid at the time of settlement for either a purchase or refinance.
Dale Archdekin
Web Reference:  http://www.liveinphilly.net
0 votes
Horlow , , 19440
Sat Sep 13, 2008
john.
ask another loan officer. email Tim Mittl. i closed an FHA loan with him last week in bucks county, he is an expert in the field here in PA
he 's prompt and very helpful!!.
tim_mittl@countrywide.com
0 votes
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