What Homeowners Should Know about FHA Closing Costs

There are times in one’s life that individuals wish would never end such as an ultimate night out with the right person or parents wishing their child could remain young and innocent; a feeling of absolute bliss that would never end.  Then there are those times that you cannot wait to be over with such as a painful visit to the dentist or that same so-called “ultimate” night that turns into a total disaster from beginning to end; a feeling of embarrassment or being so uncomfortable that you would give anything for this to end.  When it comes to refinancing, some people want the process to be over with as quickly as possible no matter what the consequences may be. For some, an FHA closing costs refinance can either be confusing or in order to be done with the process, do not realize the pros and cons while the focus is just to be done with it.  Hopefully, we can take a look at what individuals should understand about this type of a government backed loan and when finished, the feeling of wanting to be done with this already can be changed to satisfaction and knowing that doing this will be beneficial when finished.

What is an FHA Closing Costs Refinance?

FHA RefinanceAnyone who has a mortgage on their home should be familiar with closing costs.  Before the sale of a home is completed, there are certain fees that the new homeowner is responsible to pay.  Some examples of these fees include: any inspection and appraisal costs, attorney’s fees, cost for a lender’s organization as well as a home inspection that can run up to $200.  There are other costs but you can get a sense of how expensive these fees can be.  I bring this up not to scare you from purchasing a new mortgage but to realize that options can be limited if finances to cover these costs immediately are unavailable.  However, when looking to acquire a federally backed loan, it is important to understand that the closing process does not necessarily have to be expensive.  In fact, with an FHA closing costs refinance, some of these fees can be taken care of by the lender during a refinance of an existing housing administrative loan.

With that said, it is the responsibility of the borrower to comprehend what is taken care of by the lender and what has to be paid by the mortgagee.  Also, there are options available that allows these fees to be paid immediately or throughout the length of the new mortgage.  Being how the primary goal of the refinance is to have access to extra finances when the process is finished, the idea of getting this over with a.s.a.p. should be thrown out the window and focus only on getting a successful new mortgage.  Now that it is clear what the focus should be on, let’s look at some options a mortgagee should consider in regards to handling closing costs.

Can Mishandling Closing Costs have Financial Consequences?

One TV show I like to watch deals with a couple being shown several properties to look at.  All of them need renovations and after consideration, they will pick the house to buy and renovate into their dream home.  When it comes to a new mortgage that is federally backed, a homeowner must look at options that offer different solutions in handling closing costs.  When shopping for lenders that are backed by the government, you will need to go over which costs will be paid by them and which fees you will be responsible for.  Since lenders want to stay competitive, this will be beneficial for homeowners since some lenders will offer better savings in order to refinance with them.  While the shopping spree goes on, the decision of paying closing fees immediately or through the length of the new mortgage should not be rushed as choosing poorly can lead to financial consequences.

If a homeowner has the finances to choose between paying closing costs immediately or later on, it might be wise to pay for everything upfront.  That way, it can be taken care of right away and there is no longer any concern of having to pay for the fees.  I admit it can be costly to take this option, so what can help with getting an affordable new loan is getting a GFE (good faith estimate).  This form contains information regarding the terms of the new mortgage that you are applying for as well as the estimated fees you are responsible for in obtaining the new mortgage.  The lender is supposed to provide you with one in a matter of three days, so you can use this information to try and negotiate for the best loan terms possible.

Costs through the length of the loan

When going with paying closing costs throughout the length of the new loan, this can prove to be costly not upfront but during the entire length of the loan.  Some will say that this option is better because government backed loans allow the borrower to have closing costs included in the new mortgage.  This method gives the borrower time to pay these costs when monthly payments are made.  However, there are considerations that the homeowner should be aware of.  One issue is that some lenders will charge an increased rate in order to cover closing costs, so this means the cost of payments towards the new mortgage will increase.  Another issue relates to the length of the new loan that was agreed upon.  A shorter time period means the interest that has to be paid back will not be too much.  However; if the loan is a longer time frame, such as 15-30 years, the amount of interest that has to be paid would make one conclude this refinance was an unsuccessful one.

Time stands for no man which means it is important to avoid doing something that would be a waste of it.  While we wish certain events could be frozen and relived over and over again, other matters that have to be dealt with can make some wish it was over with immediately.  Refinancing a home may have some individuals wishing it could be done quickly; yet, for it to be successful and beneficial it is important not to rush through it.  When nearing the finish line, closing fees are an important hurdle that must be dealt with.  When trying to get a new government backed loan, an FHA closing costs that are part of the refinance process should not be rushed.  We have discussed possible options on how to handle these costs and it is up to you to decide how these fees should be taken care of.  Once finished, obtaining a federally backed refinance can hopefully not looked back on as a bad experience but one that can be remembered as a rewarding time in your life.

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