subject: Shopping For Your Mortgage Loan [print this page] In these times of economic hardship many people think that buying a house is out of the question. Saving money for a down payment and then paying a mortgage every month just sounds like too much.
If you and your family are in this position there are many different tools available that will enable you to purchase a home. With a little research you can find the tool that works best for you.
A very plausible way to go about buying a home is by applying for and receiving an FHA loan. If you qualify for this loan you will be in a much better position to buy the home that your family wants or needs.
To understand how these loans work you should understand a little bit about their history. The Federal Housing Administration insures your mortgage loan.
It is important to understand that the Federal Housing Administration does not provide you with the money for the loan. This Administration will insure the loan for the lender.
When we talk about insuring the loan it simply means that if the bower defaults, or does not pay off the loan, the FHA will assume responsibility for the loan. The lender will then have to go to the Federal Housing Administration to collect their money.
Some may wonder why this is necessary or why this government agency would ever put itself in such a vulnerable position. Although it can be a risky move for the government, this insurance that they provide to the lenders enables people to take out loans for their home.
This administration has been extremely successful since it was formed in 1934. In just under eighty years this administration has insured over 33 million home mortgages.
This means that over 33 million families or household have been able to purchase homes that they otherwise may not have been able to purchase. It is estimated that just under 1 million homeowners have a mortgage that has been insured by the FHA.
The first benefit of having an FHA loan comes when you are ready to make your down payment. With more conventional loans a down payment of as much as ten to fifteen percent is required.
This makes it nearly impossible for many people to buy homes. Having an FHA loan will dramatically decrease the amount of money you will have to pay as a down payment.
The majority of FHA loans require down payments that can be as low as three percent. This difference is monumental when you are struggling to scrape together a down payment.
Many other costs are associated with buying a home that most people do not plan for. You should be aware that you will also have to pay closing costs after purchasing a home.
Having mortgage insurance is another cost that many people tend to look over. Although mortgage insurance is not necessary, it is something that many people would not go without.
There are also some loans out there that will penalize you for finishing payments earlier than scheduled. These extra penalization fees do not exist when you are paying off a federal loan.
There are specific qualifications that you must meet to be eligible to have this administration insure your loan. This makes sense though; the government needs to know that you are good for the money so that they do not end up footing your bill.
You must have a good credit record. The government will run a credit check and look through your history of borrowing and returning money.
If you know that you do not have a good credit score and you will be applying for the FHA loans in the future work with a financial advisor to improve your credit.
The second criterion is that you have the money to pay a down payment. Remember, this down payment may be as low as three percent.
And finally, the housing costs of the home you are looking to purchase can be no more than 29 percent of your gross monthly income. To figure this out all you have to do is divide your annual household income by 12 and make sure that the costs will not exceed 29% of the amount you just calculated.
You cannot receive an FHA loan from just any lender. Shopping around to find lenders that are FHA-approved is a necessary step.
After you have found a lender you will want to take the time to address all of your worries or concerns with your lender. They should be able to have you on your way to buying your home in no time.
