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Sunday, August 6, 2006 - FHA says Adios to the "Non-Allowables" List

At this point in the year, it's old news for folks who do FHA loans regularly, but for those just getting into the game or anyone who had a preconcieved notion about the complexity of FHA loans this is big news!  (That's why I decided to go ahead and post about this.)

FHA previously had a list of costs that were not allowed to be paid by the borrower.  This list was very exclusionary and created a situation where it was difficult to get an FHA loan.  Sellers were often asked to pay these closing costs for the buyer, though it usually came out of an increased sales price.  However, writing this into the contracts was a difficult thing to do.

In January, FHA sent out a Mortgagee Letter to all of the lenders that said good riddens to the List!  I was actually in a underwriter's office when it happened and boy was he happy!!!

Maybe one less barrier for you to consider offering FHA loans?

OUT WITH THE OLD  (in case you're curious)

The FHA defines allowable closing costs that may be charged to the borrower. These costs are determined as reasonable and customary by each local FHA office. All other costs in the transaction are considered non-allowable and generally paid by the seller when purchasing a new home or by the lender when refinancing your current FHA mortgage.
  • The appraisal fee and any inspection fees
  • Actual cost of credit reports
  • Lender's origination fee
  • Deposit verification fees
  • Home inspection service fees up to $200
  • Cost of title examination and title insurance
  • Document preparation (by a third party not controlled by the lender)
  • Property survey
  • Attorney's fees
  • Recording fees, transfer stamps and taxes
  • Test and certification fees, water tests, etc.
Also allowable in a refinance only: courier fees, wire transfer fees, fees to payoff bills, reconveyance fees.

AND IN WITH THE NEW: 
Click the blue link to read my mark-up of the Letter - End of FHA Non-Allowables

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