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The numbers of points charged varies in different places at different times and among different lenders.
Discount points for an FHA-insured mortgage may be paid by homebuyer, the builder of the house, or the person selling the house. Discount points may not be financed as part of the mortgage amount (unless you are refinancing your mortgage and you have sufficient equity in the home to cover the points).
HUD does not control the number of points you agree to pay your lender. HUD does not set the points that a lender may require, and HUD does not receive any of this money.
Closing Costs and Prepaid Items
When your loan is finalized, you will have to pay closing costs. These fees may include a lender's service charge or origination fee, cost of the title search, fees for preparing, notarizing, and recording the deed and the mortgage, and other items. You will also be asked to make payments in advance for such items as taxes, property insurance, and interest to the end of the month.
Certain closing costs, such as recording fees and taxes, title examination, and credit reports, may be paid by the seller, or they may be shared between the borrower and the seller, depending on the terms of the sales contract.
The Real Estate Settlement Procedures Act (RESPA) requires that your lender give you an information booklet and a Good Faith Estimate on your closing costs within three days of receiving your written loan application. RESPA also requires that at closing or shortly afterward, you must receive a Uniform Settlement Statement, which is a permanent record of all the final settlement charges. You are entitled to review the Settlement Statement one business day before you close on your loan.
Origination Fees
Lenders may charge a service charge (called an origination fee) when you submit your mortgage application. In most cases, this charge cannot exceed one percent of the mortgage amount. However, if you are buying and rehabilitating your purchase under the Section 203(k) Program, a lender can charge an additional $350 or 2.5 percent of the portion of the mortgage that is escrowed for the rehabilitation.
Commitment Fees
The lender may charge a fee to "lock in" the interest rate, number of discount points, and other terms you have agreed to, or to limit the extent to which the terms may be changed. Lenders may agree to offer the loan terms for a definite period of time (30 days, 60 days, 90 days, etc.), or they may refuse to do so. The terms of your commitment agreement will determine to what extent, if any, the interest rate and discount points may change before your loan closes. Any increase in the number of discount points or a one percent increase in the interest rate requires that your mortgage application be reprocessed.
Mortgage Insurance Premium
HUD charges a premium to insure mortgages. The premiums are used to pay claims to lenders when a borrower defaults on an FHA-insured mortgage.
Most borrowers with FHA-insured mortgages currently pay an up-front mortgage insurance premium (MIP) and an annual MIP as well. The up-front MIP can be financed into the mortgage. Your lender can provide you with more information about MIP charges.
Annual Percentage Rate
The Truth in Lending Act requires lenders to disclose to borrowers the annual percentage rate charged on a mortgage to finance the purchase of residential real estate. The annual percentage rate is calculated by adding the interest rate, the discount points, the initial service charge, the premium paid to insure the mortgage, and certain other charges collected by the lender. The Truth in Lending Act is administered by the Board of Governors of the Federal Reserve System.
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