Another Victory for Folks with FHA loans!
It used to be so hard to explain, and for me to understand, this thing about paying off your FHA loan It clearly states on your loan documents up front, that there "is No Pre-payment penalty". Why, then did FHA require extra money to be paid off.?
If you paid off your conventional loan, say on the 5th day of the month, you paid interest for five days (assuming your last monthly payment was on time, it should have taken care of the previous month's interest due).
Assuming the same scenario, if you paid off your FHA loan on any day of the month other than the first day, you paid an entire month's interest! That is 30-31 days!
Something was wrong with that! Another government rip-off! We are talking about hundreds upon thousands of dollars for nothing!
"Historically, all FHA Refinance Transactions closed at month end to minimize interest overlap for the customer on their new loan and their loan being paid off. This ruling allows for an FHA Refinance Transaction that is paying off an FHA loan originated on or after January 21, 2015 to close anytime throughout the month minimizing overlap in interest. Daily interest will be computed on the FHA loan being paid off through the date of payoff only and interest on the new loan will start the date of funding." source Caliber Loans.
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Yea thanks will pass this on to my son and daughter-in-law who are buying a house now and going FHA.
Thank you for your information about the FHA loan payoff. I will let a few friends know about this.
Hi Sharon, thanks for the comment. It probably doesn't make much sense unless you've gone to pay off an FHA loan, and find out that you've been "ripped a new one" lol
Sounds like the thing to do is pay it off on the first day of the month. Been so ling since I've have had a FHA loan, I don't remember how they work. Thanks for the heads up for folks wanting to payoff their FHA loan.
Yes, Larry, it used to be that you'd want to pay it off on the first of the month, or paying it off on the second day would cost you an additional
29-30 days interest! Now that they fixed it, it doesn't matter!
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Good information to know. Too bad it's for those originating on or after Jan 21 2015.
Yes, Sui, but good for those who can refinance and lower their mortgage insurance rate and interest rate. At least we have that!