Is it true that there can be penalties for not paying off an FHA mortgage in a certain time frame? How can I avoid that?
FHA loans do not prorate the interest on a FHA mortgage payoff. You are required to pay the interest on the loan for the month in which the loan is paid off. You do not want to duplicate paying interest on both the home purchase and sale or simply not pay a whole month of interest on a home you do not own. You should make sure everyone(lender, both realtors, and the closing company) is aware that the type of loan which is being paid off is a FHA loan. Then you should make sure the closing date is set towards the end of the month thus avoid duplicating interest paid for the new home and the one which is being sold. Also do not schedule the closing for the last day of the month because you want to make sure the payoff of the FHA mortgage has ample time to get to the lender. Another reason not to schedule the closing the last day of the month is what happens if for some reason the loan is not ready to close. The borrower would then be obligated for another month of interest because the payoff was not received by the end of the month.

Posted By: Tim Blowe, MetLife Mortgage on Monday, November 16, 2009