closing costs for fha reverse mortgages
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What are the various closing costs involved in securing an FHA-insured HECM reverse mortgage?
All eligible closing costs related to a HECM loan can be paid from the final loan proceeds at closing. Paying for the closing costs by financing them into your loan is a suitable option if you do not wish to pay from out of your own pocket. The net loan amount that you will be able to access will be reduced by the amount you used to pay for the HECM closing costs.
Origination FeeThe FHA-approved lender funding your HECM reverse mortgage may charge an origination fee to compensate for their processing costs. The maximum origination fees that a FHA lender can charge are capped at $6,000.
For homes that are valued under $125,000, the HECM origination fee is capped at $2,500. For homes that exceed this amount, the lender is allowed to charge 2% for the first $200,000 and 1% on the remaining amount.
Third Party Charges
Fees and costs associated with appraisal, title search and insurance, home inspections, property taxes, recording and survey fees are also allowed.
Mortgage Insurance Premium
In addition to the general closing costs associated with residential mortgage loans, HECM loans involve extra mortgage insurance premiums. For HECM Standard, the initial MIP is about 2%, and for HECM Saver it’s 0.01%. The exact amount charged to you will be based on the lesser of the appraisal value, the HECM maximum mortgage limit of $625,000 or the sale price. Additionally, a MIP of 1.25% is charged on the outstanding loan balance annually.
Servicing Fee
A mortgage servicing company handles all the aspects of your loan from the date of a HECM loan closing. A mortgage servicer will ensure that you receive your account statements, disburses loan funds and also takes care of payments pertaining to taxes, home insurance and other related charges.
For a HECM loan with a monthly adjustable rate, the servicing fee charged by the servicer may not exceed $35. For loans with an annual adjustable interest rate, the servicing fee should not exceed $30.
Get The Best Deal
The one thing you can do to make sure that you get the best deal on your reverse mortgage is to speak with multiple FHA reverse mortgage specialists at FHA reverse mortgage lenders. Speaking with the specialists is free and you can get all the information you need to make the best decision.
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About Justin McHood:Justin McHood is Americas Mortgage Commentator and has been providing Mortgage commentary for over 10 years.
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