FHA - FINDING THE RIGHT LOAN

Your personal situation will determine the best kind of loan for you. By asking yourself a few questions, you can help narrow your search among the many options available and discover which loan suits you best.

• Do you expect your finances to change over the next few years?
• Are you planning to live in this home for a long period of time?
• Are you comfortable with the idea of a changing mortgage payment amount?
• Do you wish to be free of mortgage debt as your children approach college age or as you prepare for retirement?

Your lender can help you use your answers to questions such as these to decide which loan best fits your needs.

55. What is the best way to compare loan terms between lenders?

First, devise a checklist for the information from each lending institution. You should include the company's name and basic information, the type of mortgage, minimum down payment required, interest rate and points, closing costs, loan processing time and whether prepayment is allowed.

Speak with companies by phone or in person. Be sure to call every lender on the list the same day, as interest rates can fluctuate daily. In addition to doing your own research, your real estate agent may have access to a database of lender and mortgage options. Though your agent may primarily be affiliated with a particular lending institution, he or she may also be able to suggest a variety of different lender options to you.

56. Are there any costs or fees associated with the loan origination process?

When you turn in your application, you may be required to pay a loan application fee to cover the costs of underwriting the loan. This fee pays for the home appraisal, a copy of your credit report and any additional charges that may be necessary. The application fee is generally non-refundable.

57. What is RESPA?

RESPA stands for Real Estate Settlement Procedures Act. It requires lenders to disclose information to potential customers throughout the mortgage process, by doing so it protects borrowers from abuses by lending institutions. RESPA mandates that lenders fully inform borrowers about all closing costs, lender servicing and escrow account practices and business relationships between closing service providers and other parties to the transaction.

For more information on RESPA, visit http://www.fha.gov or call 1-(800) CALL- FHA for a local counseling referral.

58. What is a good faith estimate and how does it help me?

It is an estimate that lists all fees paid before closing, all closing costs and any escrow costs you will encounter when purchasing a home. The lender must supply it within three business days of your application so that you can make accurate judgments when shopping for a loan.

59. Besides RESPA, does the lender have any additional responsibilities?

Lenders are not allowed to discriminate in any way against potential borrowers. If you believe a lender is refusing to provide his or her services to you on the basis of race, color, nationality, religion, sex, familial status, or disability, contact HUD's Office of Fair Housing at 1-800-669-9777 (or 1-800-927-9275 for the hearing impaired).

60. What responsibilities do I have during the lending process?

To ensure you won't fall victim to loan fraud, be sure to follow all of these steps as you apply for a loan:

• Be sure to read and understand everything before you sign.
• Refuse to sign any blank documents.
• Do not buy property for someone else.
• Do not overstate your income.
• Do not overstate how long you have been employed.
• Do not overstate your assets.
• Accurately report your debts.
• Do not change your income tax returns for any reason.
• Tell the whole truth about gifts.
• Do not list fake coborrowers on your loan application.
• Be truthful about your credit problems, past and present.
• Be honest about your intention to occupy the house.
• Do not provide false supporting documents.

FHA - CLOSING

It usually takes a lender between 1-4 weeks to complete the evaluation of your application. Often a lender will ask for more information once the application has been submitted. The sooner you can provide the information the faster your application will be processed. Once all the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. And after closing, you'll be able to move into your new home.

62. What should I look out for during the final walk-through?

The walk-through prior to settlement will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller's responsibility to fix them.

63. What are pre-paid expenses and closing costs?

There may be closing costs customary or unique to a certain locality, but closing costs are usually made up of the following:

• Attorney's or escrow fees (yours and your lender's if applicable)
• Property taxes (to cover tax period to date)
• Interest (paid from date of closing to 30 days before first monthly payment)
• Loan Origination fee (covers lender's administrative cost)
• Recording fees
• Survey fee
• First premium of mortgage insurance (if applicable)
• Title Insurance (yours and lender's)
• Loan discount points
• First payment to escrow account for future real estate taxes and insurance
• Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
• Any documentation preparation fees
• Appraisal fee
• Credit report

64. What can I expect to happen on closing day?

You will present your paid homeowner's insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.

Once you're sure you understand all of the documentation, you'll sign the mortgage, agreeing that if you do not make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You'll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.

You'll pay the lender's agent all closing costs and, in turn, he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds and you will be a homeowner.

65. What do I get at closing?

Settlement Statement, HUD-1 Form is given at or before closing if live closing and within 48 hours after closing in an escrow state. If you want a copy prior to closing for review, you must request it from the closing agent.

Copy of Truth-in-Lending Statement
Copy of Mortgage Note
Copy of Mortgage or Deed of Trust
Keys to your new home

FHA Understanding The Process    FHA Loan Types    How HUD Helps You    FHA Mortgage Insurance (PMI)    Buy a HUD Home