FHA Loan - Conflicting Information

8 Replies

Hey good evening :) 

I've been receiving conflicting info on the FHA fees, or maybe I'm just confused. Is there an upfront cost as well as well as a monthly premium? How are each of them calculated?

I am currently looking into a house hack opportunity in Connecticut. The loan would probably be about $200,000. What would be the breakdown in cost? (In reality, the purchase price is about $150,000 with another $50,000 in construction. I understand construction loans have a whole different set of rules, but I'm trying to keep it simple, to better understand the FHA fees.) 


Thanks for your time! 

Originally posted by @Ori Holzman :

Hey good evening :) 

I've been receiving conflicting info on the FHA fees, or maybe I'm just confused. Is there an upfront cost as well as well as a monthly premium? How are each of them calculated?

I am currently looking into a house hack opportunity in Connecticut. The loan would probably be about $200,000. What would be the breakdown in cost? (In reality, the purchase price is about $150,000 with another $50,000 in construction. I understand construction loans have a whole different set of rules, but I'm trying to keep it simple, to better understand the FHA fees.) 


Thanks for your time! 

FHA loan like any loan has a down payment based on the % of the total borrowed. There are closing fees based on lender related fees, 6 months property tax and 12 months home owner's insurance for escrow. With FHA, there are upfront and monthly mortgage insurance payments.

A construction loan is when you're building a new home from scratch. Sounds like what you want is a rehab loan, which would be an FHA 203K loan that includes the purchase and the rehab funds combined.

Part of a 203K includes consultant fees to help with the project and a contingency for budget overruns. 

@Christopher Phillips Thanks for the great info! I would most likely need an FHA 203K Loan. What additional fees would I be looking at? How would I go about calculating the upfront and monthly premium cost?

Originally posted by @Ori Holzman :

@Christopher Phillips Thanks for the great info! I would most likely need an FHA 203K Loan. What additional fees would I be looking at? How would I go about calculating the upfront and monthly premium cost?

FHA loans have monthly mortgage insurance. In 95% of scenarios, it comes in at about 0.85%*loanamount/12, per month.

FHA loans have an upfront mortgage insurance premium. It equals 1.75% of the loan amount, typically financed, leaving you at 98.19% LTV after putting 3.5% down.

FHA 203(k) loans have the lender's choice of a bunch of extra fees, or a higher rate, or more discount points holding constant the rate. 203(k) loans are very very expensive to originate, and if lenders didn't juice up the gross profit margin to compensate then they simply wouldn't offer the program. MANY lenders are perfectly happy to simply not offer for a variety of reasons. These are also the highest risk loans that exist.

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@Monique Jeffries , Thanks. I think I have a bank who will work with me on an FHA 203K Rehab, but if that doesn't work out I might revert back to a bridge loan. Thank you for the great info!

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