YOU ASK:

What closing costs does the seller have to pay on FHA loans?

WE ANSWER:

One benefit of an FHA loan is that it allows the seller to take on some or all of the costs. The FHA home loan program limits the buyer's closing costs only to the costs that are considered "allowable", these are parts of the closing costs that are considered "customary and necessary". This definition may vary with different local FHA offices.

These costs can range from 2 to 7% of the property's selling price. And, if you use an agent or broker, it may even go higher since you will also pay the commissions.

  • FHA fees - Before, this was solely the responsibility of the seller. Today, it has been made negotiable between the buyer and the seller.
  • Survey Fees
  • Courier fee (to pay off the mortgage)
  • Release of Mortgage - The seller should provide records stating that the mortgage of the house has been completely settled.
  • City and town taxes, as well as state capital gains and transfer taxes - The rates of the tax payments will vary from state to state. This can be a flat fee or a fixed percentage of the purchase price.
  • Title insurance - This can be a reissued policy if the seller would by the insurance from the company that has already covered the same property.
  • Lawyer's fees
  • Co-op or condo move-out fee - Some co-ops and condominiums will charge a certain fee in order to allow the sale of the coop or condominium property.
  • Association transfer fees - This would include fees for processing the closing documents, inspection fees, move-out deposits and sales papers.
  • Inspection Fees/Zoning and Building Codes Certificates of Compliance - These fees will be needed to show that you have complied with the regulations on zoning and building codes. An inspector will visit your property to check.
  • Payments to keep utility bills up to date - You need to show that you are current on your utility bills. Thus, you have to pay for copies of your paid bills.
  • Home warranty - This certificate guarantees to the buyer that all the electrical outlets are working at the time of closing, the same as all electrical and mechanical appliances. This is given to also guarantee for the first year of ownership.
  • Home Inspection fees (for pests, radon, etc.) - An inspector will visit your home to check for radon, pests and other items.

Other costs that may be expected to be paid by the seller include association reserves, special assessments to associations and credits that are given to the buyer.

The seller is also expected to pay off all mortgages, line of credit or home equity loan so that any interest that is charged and related to the period before the closing date will not be charged to the new owner.

The same goes for taxes for "upside down loans" - this happens when the proceeds of the sale of the property is not enough to pay off your loans (mortgage, line of credit or home equity loan). The lender may agree to condone these accounts, but the IRS will credit this condonation and will charge for this.

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