Learn More About FHA Loan Cash To Close
January 30, 2024
How much cash to close do you need for an FHA mortgage? Chase Bank asks for between 2% and 6% of the purchase price, Rocket Mortgage lists cash to close as between 3% and 6%, and other businesses may have their own version of this range.
Bottom line? You’ll want to determine how much home you can afford early in the planning stages so you can do the math on both the down payment and closing costs.
How to Determine How Much You Can Afford
Use an online mortgage calculator to estimate how much home you can realistically afford. Borrowers sometimes view that number as a bit flexible. However, be careful of what some in the industry describe as “cost creep.”
A compromise on the price here, a higher-than-expected expense there, and suddenly you could find yourself over your actual budget in terms of how much you pay upfront and monthly over the loan's lifetime.
It pays to be a bit conservative in your financial estimates regarding how much you should spend.
Closing Costs Are Separate From Your FHA Loan Down Payment
Don’t assume the money you pay to close (mortgage insurance, appraisal fees, lender fees and other closing costs) will be considered part of your down payment. It will not. The down payment amount is not changed by the money you pay at closing.
Some Transactions Require More Money Down
A construction loan may require more than the minimum down depending on the lender and other variables. Borrowers who apply for purchase loans but don’t meet the minimum FHA FICO score requirements may also be asked to pay more down. Be prepared wherever possible for this even if you aren’t sure these issues affect you.
Follow Procedure
Your lender will tell you specific procedures for paying your money at closing time. Do not deviate from these instructions no matter what you are told on the phone, by text message, or any other unsolicited communication.
Scammers sometimes try to contact those approaching closing day, pretending to be your lender or an agent of the lender. These third parties may try to get you to deviate from the procedure your lender has given you to pay your cash to close.
Do not change the method of payment or its destination without personally speaking to your loan officer. Don’t speak to any other person. Call the bank’s central number and ask to be transferred to your loan officer before considering any changes to the established procedure.
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RELATED VIDEOS:
Annual Income Requirements for FHA Loans
Good Credit History Helps Get FHA Loans
Stay Informed About Your Mortgage Closing Costs
Bottom line? You’ll want to determine how much home you can afford early in the planning stages so you can do the math on both the down payment and closing costs.
How to Determine How Much You Can Afford
Use an online mortgage calculator to estimate how much home you can realistically afford. Borrowers sometimes view that number as a bit flexible. However, be careful of what some in the industry describe as “cost creep.”
A compromise on the price here, a higher-than-expected expense there, and suddenly you could find yourself over your actual budget in terms of how much you pay upfront and monthly over the loan's lifetime.
It pays to be a bit conservative in your financial estimates regarding how much you should spend.
Closing Costs Are Separate From Your FHA Loan Down Payment
Don’t assume the money you pay to close (mortgage insurance, appraisal fees, lender fees and other closing costs) will be considered part of your down payment. It will not. The down payment amount is not changed by the money you pay at closing.
Some Transactions Require More Money Down
A construction loan may require more than the minimum down depending on the lender and other variables. Borrowers who apply for purchase loans but don’t meet the minimum FHA FICO score requirements may also be asked to pay more down. Be prepared wherever possible for this even if you aren’t sure these issues affect you.
Follow Procedure
Your lender will tell you specific procedures for paying your money at closing time. Do not deviate from these instructions no matter what you are told on the phone, by text message, or any other unsolicited communication.
Scammers sometimes try to contact those approaching closing day, pretending to be your lender or an agent of the lender. These third parties may try to get you to deviate from the procedure your lender has given you to pay your cash to close.
Do not change the method of payment or its destination without personally speaking to your loan officer. Don’t speak to any other person. Call the bank’s central number and ask to be transferred to your loan officer before considering any changes to the established procedure.
------------------------------
RELATED VIDEOS:
Annual Income Requirements for FHA Loans
Good Credit History Helps Get FHA Loans
Stay Informed About Your Mortgage Closing Costs
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