HUD May Agree to Pay These Closing Costs

When preparing line 5 of the HUD Sales Contract, you will be able to request up to 3% of the bid amount for closing costs over and above those to be paid by HUD.  These closing costs can include most costs associated with a buyer obtaining financing or closing the transaction.

Please include in your calculations that HUD will not pay the cost of title insurance or the settlement.  Therefore, these costs could be included in any request on line 5.

HUD will automatically pay certain closing costs at settlement. Other closing costs may be paid by HUD in accordance with the terms of the form HUD-9548, Sales Contract.

In an effort to ensure that purchasers, real estate brokers and/or sales agents, HUD’s management and marketing contractors, and HUD’s contracted closing agents are provided with consistent information, the following list distinguishes closing costs that are automatically paid by HUD and those which may be paid if amounts are indicated on Lines 5 and/or 6a of the Sales Contract.

The following is from HUD Notice H2001-13 that provides some specific guidance for different types of closing related costs.

Closing costs automatically paid by HUD

  • Proration of property taxes and any special assessments such as HOA fees, utility bills.
  • Settlement or Closing Fee if closing agent is registered in the HUD Buyer Select program
  • Transfer Charges and Recording Fees for the deed only

Closing costs which may be paid by HUD

  • Broker’s Sales Commission for the Selling Broker Only paid if indicated on Line 6A of the Sales Contract.

Additional allowable closing costs to be paid if sufficient funds are indicated

Purchasers may specify a dollar amount on Line 5 of the form HUD-9548, Sales Contract, that they expect the Department to pay towards their financing and closing costs. HUD will not pay more than the actual cost of an item, and will not pay a total amount greater than that requested in Line 5.

As HUD will only pay the actual closing costs, not to exceed the amount requested on Line 5 of the form HUD-9548, Sales Contract, any monies remaining after the allowable closing costs have been paid will NOT be credited to the purchaser(s) at sales closing.

Additional allowable closing costs that may be paid by HUD at sales closing

  • Appraisal Fee: If there are sufficient funds on Line 5, HUD will pay for the appraisal on an FHA 203(k) loan that is necessary to determine the “after rehab” value or appraisals needed to obtain other financing if there are sufficient funds on Line 5
  • Credit report: Up to $20 will be paid if there are sufficient funds on Line 5
  • Flood Certification: If the property is being offered with FHA insurance, is on a Flood Plain, and there are sufficient funds on Line 5, HUD will pay for Flood Certification
  • Home Inspection: If there are sufficient funds on Line 5, Inspection fee of up to $250 will be paid
  • Homeowner’s Warranty: The amounts that will be paid vary by state.  Indiana it is limited to $400.  This payment is  provided there are funds available from Line 5
  • Loan Discount Points: If there are sufficient funds on Line 5, up to 3 percent to buy down the rate, with certification from lender
  • Loan Origination Fee: If there are sufficient funds on Line 5, up to 1 percent will be paid on Conventional/FHA loans; up to 1.5 percent will be paid on FHA 203(k) loans
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WILMOTH Group is headquartered in Indianapolis, Indiana. We focus on providing creative local solutions for a variety of residential real estate needs including, properties for sale, property management services in Central Indiana.