New Yorkers pay some of the highest closing costs in the nation when either buying or refinancing residential real estate. The changing lending landscape has introduced many New Yorkers to FHA Insured Mortgage Financing. The Federal Housing Administration (FHA) has been in existence since 1934 to assist Americans with home financing options not otherwise provided through other lending channels. With lending standards on Conventional Loans (FannieMae/FreddieMac) tightening, the FHA program has become the alternative method for mortgage financing in New York City.
With FHA financing becoming more prevalent in the current lending environment, it’s important for you to know the difference in closing costs for a home purchased with a regular FHA loan versus a home purchased with a conventional loan.
Closing Costs: FHA Loans vs. Conventional Loans
Appraisal Fee for FHA Loans
- $490 is the maximum amount the FHA allows an appraiser to charge for the appraisal of a single family home or condo.
Appraisal Fee for Conventional Loans
- $415 is generally the most expensive fee you’ll encounter for single-family homes and condos financed with conventional loans.
Mortgage Insurance for FHA Loans
The FHA charges two mortgage insurance premiums: the upfront premium and the annual premium.
- The Upfront Mortgage Insurance Premium (UFMIP) is currently 1.75% of the base loan amount on purchases.
- Your lender will disclose the amount of the UFMIP on the Good Faith Estimate of Closing Costs (GFE) as a closing cost.
- Occasionally, a Borrower pays the UFMIP in cash at closing along with other closing costs.
- More frequently, the UFMIP is added to the base loan amount and financed over the life of the loan.
- The UFMIP will also affect the Annual Percentage Rate (APR) on an FHA Insured Loan.
- For an FHA loan compared to a Conventional loan with the same interest rate, the APR will be higher for the FHA loan due to the UFMIP.
There is also a small Tax Service fee. Lenders charge anywhere from $35.00 to $75.00 for this one-time closing cost.
Here are the FHA closing costs for two properties currently listed on StreetEasy:
1. A two family home in Bedford-Stuyvesant, $710,000
If a Purchaser applied for FHA Insured financing with 3.5% down payment the FHA closing fees (only FHA fees, not other closing costs) would be:
UFMIP: $11,990.13
Appraisal Fee: Maximum FHA 2Family appraisal fee: $640.00
2. A FHA Approved Condo in Yorkville
If a Purchaser applied for FHA Insured financing with 3.5% down payment the FHA closing fees (only FHA fees, not other closing costs) would be:
UFMIP: $10,959.99
Appraisal Fee: Maximum FHA condo appraisal fee: $490.00
This Condominium is FHA approved.
If you are considering purchasing a Condominium with FHA Insured financing, the Condo must be approved. You can verify the status of FHA Approved Condos here.
2 Comments
Good work breaking it down for us to understand.
FHA loan means you’ll have to deal with two separate entities to get your mortgage — meaning that you could end up going through double the red tape.
REF: http://www.realtypin.com/news/Story/680-The-Ins-and-Outs-of-the-FHA-Loan-Process