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What You Need To Know About Fha Mortgage Loan

By Expert Author: United Lending

Before going into the specifics of the FHA loan, itís crucial to first address the question: what is a mortgage? You might be surprised to know how many people donít understand the terms they signed up for, as proven by the housing bubble that burst and left hundreds of thousands of Americans homeless. In basic terms, a mortgage is a collateralized debt you will take on to pay for your home. Once you default on payments for a certain period, the bank can take away your home.

What is FHA loan and is it right for me?

The FHA loan allows for a loan downpayment, which makes it attractive for first time buyers. Why would banks agree to lower the payments for home loan rates? Thatís because the loan is insured against default by the Federal Housing Administration. Once you default on payments, the FHA will owe the lender. In theory, nearly everybody can qualify for an FHA loan since it doesnít place a cap on income.

Thereís no minimum credit score under the FHA, or to rephrase it: your credit worthiness will be assessed individually. Theoretically, even if you have filed for bankruptcy you are still going to qualify for an FHA loan. However, even with the FHA loan, some lenders might still use your low credit score against you.

FHA is not a lender

You donít apply at the FHA for a home loan because itís an insurance fund. You need to deal with lenders that are certified by the FHA. Again, the cost of mortgage can vary from lender to lender, and from location to location. You wonít be approved, for example, if you take out a loan greater than the average housing prices in your area. Thatís why itís crucial that you ask around to get the most attractive home loan rates.

What about insurance?

When you take out an FHA mortgage, grandfathered into the contract are two insurance premiums: the upfront premium which represents about 2.25% of the total loan amount as well as the annual premium which is 0.55% of the amount. You can either pay the upfront premium when you take out the loan or can be incorporated in your home loan rates. The annual payment, meanwhile, will be paid along with the monthly mortgage payment. You must however do your due diligence and compare the FHA loan with the rates offered by non-FHA accredited lender to find out which is better.

The main motive of this article is to provide great information about fha mortgage and mortgage payment calculator. Visit our website for more information.

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