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FHA-Insured Loan

 You've done your research and decided to refinance with an FHA-insured loan. After selecting a lender, you'll meet with a loan officer at a convenient place like your current residence or your real estate agent's office. The loan officer will help you complete a refinance application and have you sign several forms authorizing the lender to verify (check on) your employment, income and savings. Using that information your lender will order an FHA case number, an identification number specifically for your loan application.

The lender may order an appraisal to determine if the value of the property supports the sales price and if any repairs are required. The lender then makes a decision on your application.

Sign papers 

You're finally ready to go to "settlement" or "closing." Be sure to read everything and ask questions before you sign the loan documents. Ask the lender beforehand if you need to bring extra money for certain closing costs.

Calculate how much money you need at settlement

The first page of the HUD-1 Settlement Statement (shown in the sample below) summarizes all the costs and adjustments for the borrower and seller. Section J is the summary of the borrower's side of the transaction and Section K is the summary of the seller's side of the transaction. You may receive a copy of the seller's side, but it is not required.

Section 100 summarizes the borrower's costs, such as the contract cost of the house, any personal property being purchased, and the total settlement charges owed by the borrower from Section L.

Beginning at line 106, adjustments are made for items (such as taxes, assessments, fuel) that the seller has previously paid. If you will benefit from these items after settlement, you will usually repay the seller for that portion of the cost.

Here is an example for you to use in making your own calculations:

In this example, the cost of the house is $100,000 and the borrower's total settlement charges (from Section L, Line 1400) are $4,000. The settlement date is July 1. Here the borrower has agreed to pay the seller for the $40 Home Owners' Association dues that have been paid for the month of July and for 25 gallons of fuel oil left in the tank. This is added together for a gross (total) amount due from the borrower of $104,065.

Section 200 lists the amount paid by the borrower or on behalf of the borrower. This will include the deposit of earnest money you put down with the agreement of sale, the loan(s) you are getting and any loan you may be assuming.

Beginning at Line 210, adjustments are made for items that the seller owes (such as taxes, assessments) that you as the borrower will pay after settlement. The seller will usually pay you or credit you for this portion at settlement.

In this example, the borrower paid an earnest(good faith) deposit of $2,000 and is getting a loan for $80,000. A tax of $1200 and an assessment of $200 are due at the end of the year. The seller will pay the borrower for six months or one-half of these amounts. Line 220 shows the total $82,700 to be paid by or for the borrower.

Section 300 reflects the difference between the gross amount due from the borrower and the total amount paid by/for the borrower. Generally, line 303 will show the amount of cash the borrower must bring to settlement.

In this example, the borrower must bring $21,365.00 to settlement.

Source:

http://portal.hud.gov/portal/page?_pageid=73,1827624&_dad=portal&_schema=PORTAL

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Be sure to do your own research and due diligence in order to become more knowledgeable about this subject. Not meant as legal or professional advice.

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