FHA Minimum Investment

Every day it seems someone finds a loophole that has to be closed or confirmed and today is no exception. In the new world of RESPA and tolerance requirements a lender may be faced with providing a refund of closing costs to the borrower at the time of closing if the fees were under stated by more than 10%. The consequence may lead to the borrower receiving cash back at closing and/or appearing on the HUD1 that the borrower did not have 3.5% invested into a purchase transaction. We have confirmed with FHA that a refund to the borrower as a result of a correction under RESPA would not impact the calculation for determining whether the borrower met the 3.5% investment. In addition, it is acceptable if line 303 of the HUD1 reflected this cash back. That being said we strongly caution lenders to use proper worksheets to verify there are no other factors involved that are a violation of FHA policy! It would be very easy to make a mistake and still end up with an uninsured loan. Members of MU’s Advisory Services, Subscribers to the FHA Practical Guide and those who have attended MU’s FHA Advanced course (also offered by Campus MBA) have access to MU’s worksheets.