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FHA Loan vs PMI-Linked Loan – The Better Alternative

FHA Loan vs PMI- Linked Loan – The Better Alternative

Mortgage insurance is the deciding factor when you have to choose between an FHA loan and a conventional mortgage. Although it exists in both cases, there are many differences between an FHA mortgage insurance and private mortgage insurance. Understanding these will put you in a better position to make an informed decision about the kind of mortgage loan you need to take.

There are two types of mortgage insurance premiums that you will have to pay if you borrow a FHA loan. The first premium is an upfront premium which amounts to about 1.75% of your loan amount. For instance, if your loan amount is $100,000, you will have to pay $1750 as the upfront premium when you obtain the loan. This amount can even be financed from your loan amount.

The second premium, known as the annual premium, will have to be paid along with your monthly mortgage payment. The percentage of this premium is decided after taking into account, your loan amount, the term of your loan and the initial LTV or Loan-to-value ratio. For instance, if the loan amount is equal to or less than $625,500, the premiums charged would be as follows:

  • 85 percent if the loan is for 30 years and the down payment made is less than 5 percent
  • 80 percent if the loan is for 30 years and the down payment made is equal to or more than 5 percent
  • 70 percent if the loan is for 15 years and the down payment made is less than 10 percent
  • 45 percent if the loan is for 15 years and the down payment made is equal to or more than 10 percent
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    The Benefits you can expect by Going for FHA Loans

    If you are planning to buy a house and shown some interest in doing so, you may already have been contacted by many FHA mortgage lenders. They may even have offered you excellent interest rates and terms on those loans. They may have spent money to purchase your details from lead generating firms that sell FHA Mortgage leads. In case you haven’t yet responded to any of these positively, it is time you think again.

    FHA loans are not ordinary loans. They are insured by the government and backed by the FHA or the

    Federal Housing Authority. read more

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    How to Find FHA Mortgage Lenders in your Area?

    If you want to own a home without making much of a down payment, an FHA loan would be a wise choice. However, this means you will have to look for a lender who is FHA approved. Although less in number when compared to conventional mortgage lenders, you can find FHA mortgage lenders quite easily. The best way to do this would be to visit the HUD website and use the search tool that you see there.

    To run a search on the HUD website, enter your city name and your state and then click on the search button. This should give you the names of all

    FHA mortgage lenders read more

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    HUD or FHA Mortgage Loan – The Better Option

    Would-be homeowners can get government loans even if they have bad credit scores or a history of foreclosures / bankruptcies. However, it is not that easy to get these loans.

    These loans are initiatives taken by the federal government to help the low-income Americans own homes in USA. It is a guarantee that the government gives to the lender of such loans that it will pay back the loan if you default.

    HUD or FHA

    The U.S. Department of Housing and Urban Development (HUD) is the federal government agency that encourages individuals to own homes in the USA. FHA or Federal Housing Administration is one of its offices through which it operates.

    There are a few loans that the HUD guarantees directly. However, these are mostly multifamily units. If you are a single-family home buyer you will have to go for a mortgage that is insured by the FHA.

    Qualifying for an FHA Loan

    The best part of a FHA mortgage loan is that you will be able to buy your dream home by putting in a down payment of only 3.5%. All that you would need is a minimum FICO score of 580.  In case your FICO score is lower than 580, you may have to pay up 10% of the home value as the down payment, which is still better than what you may have to pay in case of a conventional mortgage.

    For making the down payment you may take cash as a gift from your family members or friends or even go for a charity. The seller may agree to pay up your closing costs in case you do not have the funds. However, this might require you to pay up a higher rate of interest.

    Few More things you may need to know about FHA Mortgage Loans

    • A Bank or an FHA-approved lender is whom you may have to approach if you wish to obtain an FHA mortgage loan. Most of these lenders may contact you on their own if you show interest in borrowing such loans. Your details would be given to them by lead generating firms that sell FHA Mortgage leads.
    • Your options may be limited when compared to conventional mortgages, which means you may have to do some actual research on choosing the right lender for obtaining an FHA mortgage loan. The chances of getting FHA loans at favourable terms and interest rates are quite slim, since the number of lenders is lesser.
    • There is a limit up to which FHA can insure your loan and this limit might vary from region to region. The maximum amount that FHA can insure is $625,000 and this amount can be very limiting, going by the standards of metropolitan areas. Also since FHA does not approve all condo developments, you may be left with very few less-expensive housing options.
    • FHA loans would require you to pay up FHA insurance premiums along with your monthly mortgage payments. This is to ensure the banks or FHA lenders get paid if the FHA mortgage goes bad. This premium payment is not always tax deductible.

    FHA mortgage loans can help you own your home even if you have a bad credit history. However, you will have to find a good housing option that is approved by the FHA. Get in touch with Heritusleadtransfer if you need

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    Conventional, FHA and VA Loans – A Comparison

    In case you wish to borrow a mortgage to buy your home, it is better to understand the differences between the traditional mortgages, FHA loans and VA loans.

    As loans, all three of these are similar. They are issued by banks or by other approved lenders. Nevertheless, they do differ in certain ways. Read on to know which one suits your needs in the best way…

    Conventional Loans

    A conventional mortgage or loan is one that is not guaranteed or insured by the federal government. So, then lender has nothing to fall back upon, in case of a default. This is why the lenders of these conventional mortgages make it mandatory for you to make a 20% down payment for the property that you wish to buy. In case you cannot afford this, you would be required to pay PMI or private mortgage insurance that adds up to your monthly mortgage payment.

    Although these loans are not guaranteed by the Federal Government they have to adhere to the guidelines that are set by Freddie Mac (Federal Home Loan Mortgage Corporation) and Fannie Mae (Federal National Mortgage Association). Anyone can obtain conventional loans; however there are certain criteria with regard to credit score and income requirement, for you to qualify for one.

    FHA Loans

    FHA loan is one that is duly insured by the FHA or the Federal Housing Administration. So, if you take an FHA loan from the bank and in case you do not repay the same, the loss will be compensated by the FHA. These loans have certain excellent terms that include:

    • A down payment which is as low as 3.5% of the purchase price of your home
    • Nominal closing costs
    • Closing costs being adjusted with the loan amount itself

    Anyone can apply for a FHA loan, which is quite easier to qualify when compared to the conventional mortgages. Nevertheless, there is a maximum loan limit which depends upon the average housing cost in your region. Also, you would be required to pay up Mortgage Insurance Premium (MIP), which becomes a part of your FHA loan. This is something that helps FHA pay up the claims of the lenders when any of the borrowers of FHA loans default.

    VA Loans

    VA loan is one that is guaranteed by the VA or the Veterans Administration. Not everyone can apply for these kinds of loans. Only the following people qualify for VA loans:

    • Veterans
    • Members of US armed Forces
    • Eligible and surviving spouses
    • Reservist/National Guard members

    You need not make any down payment in case of VA loans. Also, it involves no insurance either. In case you are one of the above categories, you will have to get in touch with a VA-approved lender in order to apply for a VA loan.

    Once you start showing interest in borrowing one of these loans, many lenders may start contacting you by themselves with the help of FHA Mortgage Leads, VA Mortgage Leads or

    Mortgage Live Leads read more