Subject: Closing Costs Paid by the U.S. Department of Housing and Urban Development

•  The short of this is: we can request that HUD pay up to 3% of your closing costs in the initial contract. Leaving you with about 0-1.5% left in closing costs, pre-paid taxes and insurance depending on your lender and how your loan is structured.

This Notice supersedes Notice H 2005-12, and announces a new and simplified policy on

closing costs payable by the Department on sales of single-family properties owned by the U.S.

Department of Housing and Urban Development (HUD). This change is intended to align HUD home

sale policies with the industry practices.

Upon closing of a HUD-owned single-family property, the Department will allow to be

deducted from its proceeds, purchaser financing and closing costs considered to be reasonable and

customary in the jurisdiction where the property is located. Form-HUD-9548 (Sales Contract –

Property Disposition Program), shall be used to reflect the total dollar amount HUD is expected to

pay towards a purchaser’s financing and closing costs. However, in no event may the costs exceed

three percent (3%) of the property’s gross purchase price. If the total closing costs reflected on the

HUD 1 settlement statement are less than the amount indicated on the sales contract, HUD will

reimburse only the actual costs charged and will not credit the purchaser with any difference either in

cash or through a reduced purchase price.

Within the three percent (3%) allowance, HUD will reimburse loan origination fees up to one

percent of the mortgage. However, on an FHA 203(k) rehabilitation mortgage loan, HUD will

reimburse one and a half percent (1.5%) of the mortgage.

The closing cost policy announced in this Notice shall be effective for all sales contracts

executed on or after the thirtieth day following the issuance date reflected above.

If you have any questions, please contact our toll free number for assistance at 1-800-CALL

FHA or 1-800-225-5342.

____________________________________________

Brian D. Montgomery

Assistant Secretary for Housing-

Federal Housing Commissione