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why am i being charged pmi insurance and a fha funding fee??

arent they the same thing?? or if iam wrong what is a fha funding fee?? thanks

raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

There's no such thing as an FHA Funding Fee. The USDA and VA programs have a Funding Fee, but that's because their programs are "guaranteed", not "insured". With FHA you should only be paying insurance.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

thanks raymond, iam buying a new house and my frist good faith estimate did not have a $3000 charge for a funding fee, but after we agreed on a price the new good faith has pmi insurance and a $3000 fha funding fee??? how can i tell or prove to the bank lady that their is no such thing as a funding fee on a fha loan????? thanks again.

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>how can i tell or prove to the bank lady that their is no such thing as a funding fee on a fha loan?

They should know that already - I wouldn't trust them and would find a new Loan Officer at another company. I'm hoping your Realtor didn't tell you that's the Lender she always uses and introduced you ... because then I'd suspect the Realtor too.

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scratchy_atom's picture
scratchy_atom | Joined: November 29, 2009 03:11 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

its a new home, and the builder will pay half the closing cost if you use their lender so i think their one in the same? i think i will use someone else for the loan thanks raymond, and just to clarify for me, if you go with a fha loan you only have to put 3 1/2 % down and because you are borrowing more than 80% you need pmi and thats it??? and if you do a va loan their is a funding fee? and thats used as your pmi???? thank you so much.

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raymond's picture
raymond | Joined: July 3, 2009 09:38 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

>>ts a new home, and the builder will pay half the closing cost if you use their lender so i think their one in the same?

They have a business relationship and those types of relationships usually benefit them - not you. They should pay half the closing costs if you select your own Lender too, to make it fair. Locking you into their Lender means their Lender doesn't have to offer you a competitive interest rate or fees (as you've found out).

>>i think i will use someone else for the loan

You should get a couple quotes from the "mortgage quote" portion of this website - you owe it to yourself to comparison shop. Check out your local Bank of America too, they have some pretty good deals. Compare everybody side-by-side and select the program that works best for you. And if you select a Lender other then the Builder's Lender, I'd still ask them to pay 50% of the fees. Builder's are hurting real bad right now and they're not going to want to let you go.

>>just to clarify for me, if you go with a fha loan you only have to put 3 1/2 % down

Yes

>>and because you are borrowing more than 80% you need pmi and thats it?

No. You always have to pay MI with FHA. The 80% guideline applies to Conforming programs.

>>and if you do a va loan their is a funding fee? and thats used as your pmi?

Yes. VA loans aren't insured, but they offer 100% financing without any MI, making them more risky for the Investor. So a Funding Fee is charged to offset the risk (unless the Veteran was injured in the line of duty - and a few other exceptions - in those instances they don't have to pay the Fee).

Conforming programs are usually better then the VA, USDA or FHA programs, so Conforming should be your first choice, as long as you can handle the down payment requirement.

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cupplesjonathan71's picture
cupplesjonathan71 | Joined: November 4, 2009 09:43 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

scratchy_atom,
as suggested by Raymond go for another lender. before that do a basis market comparison. Then ask builder about high charges asked by his lender & negotiate further for it. Both of them are not following healthy @ trasparent business policy.

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jveenstra's picture
jveenstra | Joined: November 10, 2008 09:03 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Perhaps you are just using incorrect terminology.

FHA has an Up Front Mortgage Insurance Premium (UFMIP) as well as monthly MIP. You may be calling the UFMIP a funding fee. No matter what you call it, it still exists and going to another lender will not do away with the UFMIP and the MIP.

The FHA UFMIP is 1.75% of your mortgage amount.

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scratchy_atom's picture
scratchy_atom | Joined: November 29, 2009 03:11 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

jveenstra- you are right i had the terminology wrong. thanks for helping me out. so with a fha loan you pay an up front insurance payment and monthly payments? i just sold a house in nc and the couple that bought it from me went fha but looking at the hud from the sale they only paid an up front insurance payment, no monthly payments, can you tell me why i will need to pay but they did not??? thanks to all for your help

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi scratchy_atom,

As far as I know, the insurance premiums are mostly included in the monthly payments. However, if a borrower wants to directly deal with the insurance company or pay the property taxes, then it won't be included in the monthly payments. In that case, they can send their payments separately to the insurance company.

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jveenstra's picture
jveenstra | Joined: November 10, 2008 09:03 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

scratchy atom, disregard whatever adonis is talking about. adonis is talking about home fire/hazard insurance and the question is about FHA Up Front Mortgage Insurance Premium and monthly Mortgage Insurance Premium (MIP).

scratchy atom:
1. You sold a house, not a condominium???

2. The UFMIP can be paid in cash rather than adding to the loan amount. When you look at the HUD, how sure are you they paid no UFMIP? It is in the loan amount, so, it just shows as a loan. You know your sales price. You know the dawn payment you received in cash.
If you subtract the cash down payment from the sales price, is the answer the mortgage amount the buyer received or is it higher?
If it is higher, the difference is the UFMIP added to the base FHA loan amount (the base FHA loan amount is the sales price minus the cash down payment)

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If I pay Mortgage Insurance and Hazard Insurance in my monthly mortgage payment, why do I have to get Homeowners Insurance?

Thank you.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

This is in my Preliminary Cost Estimate. I'm purchasing a new home/second home. My first home has no liens or mortgage.

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi jorge!

Welcome to forums!

A query similar to yours has been replied to in the given page:
http://www.mortgagefit.com/Mortgage-Basics/Hi-John-Im-in-the-process-of-...

Please take a look at it. I hope it will help you.

Sussane

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