FHA is a great program for first time home buyers. If you have an FHA loan, and are planning to sell, it’s likely your first time selling as well. There are a few important things that you should know about selling a home with an FHA loan.
Closing and Payoff Dates
A large percentage of closings take place at the end of the month. However, sellers who need to pay off FHA loans should consider closing earlier. Why? The interest for FHA home loans are charged at the beginning of every month. So, on the 1st of the month, you are charged interest for that entire month. If you sell your home on the last day of the month, it will take a few days for the payment to reach your lender. Therefore, you would incur an entire month’s worth of interest charges by doing so. On the other hand, if you closed a week earlier, the payoff would reach your lender before month’s end and you would not be charged an additional month’s interest.
Selling a Home With an FHA Loan
FHA allows you to only have one loan at any given time. Therefore, if you plan to sell one home and buy another, you may do so as long as you are paying off the existing FHA loan in order to purchase your new home with yet another FHA loan. Additionally, if your existing loan is only a few years old, you may qualify for a credit on your up-front PMI charges. Be sure to ask your lender about this. The credit gradually decreases and disappears the longer you own a home.
Interest rates remain low, however, they are expected to rise. If you have a low fixed rate, this could be used as a selling feature for your home. FHA loans are assumable, which means they can be transferred to your buyer. Price sensitive buyers could really benefit from a low fixed rate loan, making your home more marketable. This isn’t an issue now, but keep this in mind if you have an FHA loan and plan to sell in the future, when interest rates are high relative to your fixed rate home loan.
More on Selling a Home with an FHA Loan
Knowing how your FHA loan works can help you save money during the home selling process. FHA loans can make your home more appealing to potential buyers, allowing you to sell for a higher price. If you’re planning to payoff the loan, selecting the right closing date can avoid unnecessary interest charges. Contact your loan officer to learn more about your existing FHA loan or to apply for a new loan.