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You've found the right home, you've made the offer, and had your FHA mortgage loan application approved. The appraisal has been done, your closing date is set. What more does the buyer need to know about the process to be ready for the closing date?

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FHA Loan Articles

News and Updates for Homeowners

FHA Loans: Closing The Deal

August 6, 2012 - You've found the right home, you've made the offer, and had your FHA mortgage loan application approved. The appraisal has been done, your closing date is set. What more does the buyer need to know about the process to be ready for the closing date?

FHA loan rules include a settlement requirements which are needed to properly close the FHA mortgage loan. According to HUD 4155.1, Mortgage Credit Analysis for Mortgage Insurance, The lender has items which must be provided to the borrower. These are listed in the section of the FHA loan rules titled, "Lender Responsibility for Estimating Settlement Requirements".
These requirements include the following:

"For each transaction, the lender must provide the initial Good Faith Estimate (GFE), all revised Good Faith Estimates and a final HUD-1 Settlement Statement, consistent with the Real Estate Settlement Procedures Act (RESPA), to determine the cash required to close the mortgage transaction."

FHA loan rules require the down payment for FHA home loans and any other borrower expenses to be included in the amount due from the borrower at settlement time. "Such additional expenses include, but are not limited to
  • closing costs, such as those customary and reasonable costs necessary to close the mortgage loan
  • prepaid items
  • discount points
  • non-realty or personal property
  • upfront mortgage insurance premium (UFMIP) amounts
  • repairs and improvements
  • real estate broker fees
  • mortgage broker fees
  • premium pricing on FHA-insured mortgages, and
  • yield spread premiums."

Another portion of the FHA loan rules, a section titled "Disclosure of Origination Charges on the Good Faith Estimate". includes a requirement that the participating FHA lender must disclose "the sum of all fees and charges from origination-related charges in Box 1 on page 2 of the Good Faith Estimate (GFE). The figure in Box 1
  • represents all compensation to the lender and/or broker for originating the loan, and
  • will most often exceed the specific origination fee caps set for government programs."


FHA Loan rules also state, "The GFE (Good Faith Estimate) requires that lenders provide an aggregated cost for origination services. Lenders may, however, itemize specific distinct origination fees and charges in the empty 800 lines of the HUD-1 Settlement Statement, to the left of the column, if required by a government program or state law to provide more detailed information on those fees and charges."

So what is the actual amount of cash up front you the borrower need to close an FHA mortgage? FHA loan rules say this amount is the difference between:
  • "total cost to acquire the property, including the expenses listed in HUD 4155.1 5.A.1.a , and
  • amount of the mortgage, excluding any Up Front Mortgage Insurance Premium."


It's a very good idea to become familiar with these rules and requirements--you should wake up on the day you're scheduled to close the deal knowing what fees and expenses you're paying, and how your lender is required to document those charges prior to closing the deal. Being an informed borrower is just as important as the amount of down payment you choose to make or your choice for an FHA lender.