In an FHA-insured loan transaction, who may pay the discount points?

In an FHA-insured loan transaction, either the seller or the buyer can pay the discount points. This flexibility allows for negotiation in the transaction, which can help facilitate the sale or adjust the financing terms to make the mortgage more affordable for the buyer.

Discount points are a form of prepaid interest that a borrower can pay at closing to reduce the interest rate on their loan, thus potentially lowering their monthly payments. Sellers may choose to pay these points as an incentive to make their property more attractive to potential buyers, especially in a competitive market. On the other hand, a buyer may also opt to pay the discount points upfront to secure a lower mortgage rate for the duration of the loan.

Understanding this option can help both parties strategize their closing negotiations effectively, ensuring that they can meet their financial goals while working within the terms set by the Federal Housing Administration (FHA).