The Benefits of an FHA Mortgage

Advantages of an FHA mortgage in 2017-18

FHA mortgage is essentially backed by Federal Housing Administration which basically guarantees the lender or the bank that in the event borrower makes a default on his payment. FHA will make the bank good with the sum loaned on the mortgage.

Hence banks and lenders find it easy to provide a mortgage on easy terms to the borrowers. Whether you are buying a home or refinancing as an existing FHA mortgage holder.

What is an FHA Loan: Complete Guide to FHA Loans

What that means is, like all individuals we go and buy a life insurance policy that basically acts as a hedge against any calamity on life that may happen and protects our family. The same way when you take an FHA mortgage.  You have to buy FHA Mortgage Insurance up front from FHA for your mortgage. 

This mortgage insurance has two components. one is Called UPFRONT MORTGAGE INSURANCE which is 1.75% of your Base mortgage amount that you are borrowing. The other is Called MONTHLY MORTGAGE INSURANCE which is a smaller percentage based on the appraised value, loan term, and mortgage balance. This is paid monthly to FHA like any other insurance premium.

Both the upfront and monthly mortgage insurance premium is tax deductible. The monthly mortgage insurance for almost any loan term or product type the borrower goes for would be for life. Typically in case of another mortgage like a conventional mortgage. The moment you carry mortgage balance which is equal to 80% of the appraised value of the home in the current market. Mortgage insurance can be waived but that is generally not the case with FHA.

The advantage to the borrower is that he gets a lower rate than any other mortgage type. The underwriting is not as tough or scrutinized because it's already backed by FHA and borrower is taking an Insurance policy over and above the mortgage. It comes with a very low down payment option of only 3.5%. Not only that, once you do get enrolled for an FHA and the next time you refinance. You are not required to pay for another appraisal. This is called STREAM LINE Refinancing. Your income and credit scores and not scrutinized as much either. STREAMLINE essentially means that you already are in FHA bucket and from FHA bucket you are moving to the same FHA bucket to get some monthly savings.

Another advantage is that once you take FHA paying UPMIP of 1.75% of the base loan amount. The next time you refinance. That does not mean you pay again 1.75% of the loan amount. The last UPMIP that you paid is adjusted with the new 1.75%. A borrower does not get a cash back of UPMIP but its adjusted with the new loan and its new UPMIP as a rule with some conditions.

For more information visit www.affordable-payment.com or call 323-705-3191 if you are a California Mortgage borrower or If Texas Mortgage Borrower call 713-463-5181 EXT 154