FHA 203k Loan Closing Costs – Am I being ripped? | FHA Home Mortgage Loan Interest Rates

FHA 203k Loan Closing Costs – Am I being ripped?

The tale of my home buying process in today's marketplace has all the elements of a best selling tale! But, I will cut to the immediate dilemma I am facing.

On a home which has a leaking roof, no appliances and some maintenance issues, conventional mortgage is ruled out (or so I am told). The only options are buy with cash or buy with a 203k kind of a loan. Since I dont have that much cash, i chose to go for a 203k loan.

I approached a broker and a well known Retail bank for such a loan. I got GFE from both and chose to go with the broker since there costs were significantly lower than the Large Retail Bank. The difference was primarily a large chunk of loan discount points.

I received my HUD-1 couple of days back (after a long delayed funding processs, where I had to seek 3 extensions on the closing date from the seller who is a Bank), which is another tale altogether. I was surprised to see about $ 40k in all closing costs on a loan of 465k (I live in San Diego). Largest surprise was a MANDATORY 2.5 points in Loan discount and about 2k in various processing and admin charges. [Of course, the Hazard Insurance is another 3.5k because of wooden, leaking roof, but that can be taken care of honestly quickly]. There is one point in Origination, but that was told upfront.

Now, my broker tells me that this is the best they can do inspite of the incorrect GFE, since they say this is absolutely the best deal I can dream of having on a 203k loan, which evidently no lender wants to do (shows!).

I have 2 choices – I can walk away from the broker/ lender and find a new one (question for another extension from seller) or suck it up pay everything as I am being questioned for (and maybe go legal after i buy the home for predatory lending practices).

My question to the experienced folks out there – Are 203k loans really this expensive? I am paying $ 18k in origination points and fees and a 1.75% (changed from 1.5% till dec 2008) in PMI to FHA apart for the other normal / prepaid costs.

Secondly, does anyone know of any alternatives where I can get to buy the house and maybe get a second line of credit for making repairs on the house or should i just try and approach a more reasonable lender who does 203k?

Any help will be greatly appreciated. I have been trying to solve this since late October and a part of me is desperate for a choice – excellent or terrible.

Thank you.

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Tags: 203k loan, 203k loans, appliances, chunk, closing costs, closing date, conventional mortgage, couple of days, dilemma, FHA, FHA 203k, hazard insurance, home buying process, HUD, leaking roof, loan discount points, maintenance issues, origination points, pmi, predatory lending practices, retail bank

This entry was posted on Thursday, June 11th, 2009 at 11:19 am and is filed under FHA 203k. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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One Response to “FHA 203k Loan Closing Costs – Am I being ripped?”

Irish Eyes says:

June 11, 2009 at 11:19 am

That's high and it sounds as if you are getting screwed. The broker is betting on the fact that at this late date, you are not going to walk away.

The 1 point origination on an FHA loan is standard and allowed by FHA. I have never seen $2000 in processing and admin. fees, but as a disclaimer I am not in California. The MIP…again that it is standard and the rates are based by FHA. As for the "mandatory" discount points…who made them mandatory? If the broker is trying to say that he does and it was not on the initial signed GFE then that is illegal and he has to honor the signed one. If it is something for the lender (maybe to buy your rate down) it still should have been on the initial GFE, but if you told them not to lock in your rate, there may not be anything you can do about that.

Personally, I would find another broker. FHA K's do take a long time, so you're probably going to extend the process about a month, but I would prefer that to knowing I got screwed.

And as far as going after him later…Why? It will take forever and it will cost more money then you would even get back. But, I would report him to the state, federal and FHA departments that he is licensed with.

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