VA loan and FHA loan are 2 kinds of home loan existing in the U.S If you are a house equity borrower, there are many choices available besides conventional loans that are getting harder to get these days because of the rigid requirements of lenders and also because of the sharp rise in property rates. FHA and VA home loans Texas are two attractive options available to borrowers. There are, however, major differences between the two and it is always prudent to evaluate your options and eligibility before applying for a loan.
Difference between FHA and VA loans
Talking about differences, while a borrower must arrange 3.5% down payment in FHA, 0% down payment is required in case of VA home loans Texas.
VA loans have very low interest rates compared to FHA loans which are normally flexible interest rate loans.
Although no mortgage insurance is required in VA loans, 1. 75% of initial PIM is required in FHA loans.
In VA home loans Texas, 4% of max seller concessions are allowed, while in FHA max concessions loans are at 6%.
Certain types of fees must be paid by the seller in both VA and FHA loans.
- FHA and VA are government-initiated programs to help those in low- and middle-income groups buy homes.
- While the FHA is aimed at everyone, only active members of the armed forces or veterans are eligible to purchase homes through VA home loans Texas.
- Although a 3.5% down payment is required under FHA loans, no down payment is required in VA loans.
- VA loans have lower interest rates than FHA loans and are fixed.
- Although no mortgage insurance is required in VA home loans Texas, 1. 75% of initial PIM is required in FHA loans.
What costs does the seller pay for an FHA loan?
Because the Federal Housing Administration in the United States, or FHA, helps insure mortgages, the organization sets standards on what the buyer and seller fees must pay. Although the seller may charge a higher price asking to help cover certain sales charges, the FHA requires sellers to absorb certain costs at closing.
Tax service fee
On an FHA mortgage, the lender collects property taxes as part of the buyer’s regular monthly payments, places them, deposits them and pays them after receiving a tax bill. According to Investopedia, a tax service agency receives invoices from the state’s tax collector and forwards them to the lender for processing. These agencies usually apply a fee for their services when closing a mortgage, and the FHA requires sellers to pay this cost.
When closing a mortgage, many states and local municipalities require payment certification for the property tax buyer portion. Like the audit, the closing agent applies a tax stamp and reports tax payment to the local tax authority. The agent may require for the tax stamp and the FHA requires the seller to pay this cost.
Property tax pro rata
Because many states collect property taxes only once a year, many sellers end up closing real estate transactions after paying a full year of taxes. Although generally a buyer must pay pro rata taxes that cover the period between the close and the next tax collection, the FHA prohibits sellers from spending on the cost of the full fiscal year. Instead, according to Colorado Real Estate, the seller must pay taxes pro-rated on the property until the closing date.
In some cases, an owner may accumulate a number of liens resulting from unpaid taxes, fines, or a combination of expenses. If a property has exceptional liens, the Federal Housing Administration requires sellers to pay or settle liens before transferring the property to a buyer with an FHA mortgage.
HOA Transfer Fee
Many houses, and especially condominiums and townhouses, require owners to belong to an owner’s association. These associations control the appearance of the property and can perform maintenance on the property or outside the home. HOAs generally collect a regular fee to pay for these services, and some associations charge a fee to register the transfer of ownership. If an association collects a transfer tax, the FHA requires sellers to pay this cost rather than passing it on to the buyer.
Agent and Broker Fees
When real estate is sold using a broker, the broker usually collects a fee that covers the cost of listing the property, advertising and offsetting the agent to find a buyer. Although brokerage fees and agents often cost up to 6 percent of the final sale price, according to FHA Plus Loan, federal administrators, DIY prohibit sellers from spending this cost on buyers at the close.