Florida Mortgage Questions About an FHA-insured Loan
Why choose an FHA-insured loan? There are lots of good reasons why Florida homebuyers and homeowners choose an FHA-insured loan, especially if one or more of the following apply to you:
- You're a Florida first-time homebuyer.
- You're worried about qualifying for a Florida mortgage.
- You don't have perfect credit.
- You don't have a lot of money to put down on a Florida home.
- You want to keep your Florida mortgage payments as low as possible.
- You're worried about your monthly Florida mortgage payments going up.
If you're a Florida mortgage applicant and any of these things describe you, then an FHA-insured loan may be right for you. Why? Because FHA-insured loans offer many benefits to Florida homebuyers and a level of security that you won't find in other Florida mortgage loan including:
Low cost: FHA-insured loans have competitive interest rates because the federal government insures the loans for private FHA approved lenders.
Smaller down payment requirements: FHA-insured loans have a low 3.5% down payment requirement and the money can come from a family member, grant, employer or a Florida charitable organization as a gift.
Easier qualification: Because FHA insures your Florida mortgage, lenders may be more willing to give you loan terms that make it easier for you to qualify.
Less than perfect credit: You don't have to have perfect credit to get an FHA-insured mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA-insured loan than a conventional loan.
More protection to keep your home: FHA has been helping people since 1934. Should you suffer a temporary hardship after buying your home, the FHA has many options to keep you in your home and avoid foreclosure.
FHA insures loans to protect Florida lenders against default - FHA it does not lend money or set interest rates. For the best interest rate and terms on a mortgage, you should compare mortgages from several different lenders. An FHA-approved lender can help you start the loan application process.
You may use an Florida FHA mortgage to purchase or refinance a:
- New or existing 1- to 4-unit home,
- A Florida condominium or a
- Florida Manufactured or mobile home (provided it is on a permanent foundation).
What kinds of insured loans does FHA offer?
Fixed-rate loans - Most Florida FHA loans are fixed-rate mortgages (loans). The advantage of a fixed-rate mortgage is that your interest rate stays the same during the loan period, so you know exactly how much your monthly payment will be.
Adjustable rate loans ' Florida First-time homebuyers can be a little stretched financially. With FHA's adjustable rate mortgage (ARM), the initial interest rate and monthly payments are low, but these may change during the life of the loan. FHA uses the 1-Year Constant Maturity Treasury Index (CMT) to calculate the changes in interest rates. An index is a measure of interest rate changes that determine how much the interest rate on an ARM will change over time.
Purchase a Fixer Upper with an FHA 203K - Sometimes you might see a home you'd like to buy, but it needs a lot of work. FHA has a loan for rehabilitating and repairing single-family properties called the SF Rehabilitation Loan program (203k). You can get Florida mortgage loan which combines the mortgage and the cost of repairs. The mortgage amount is based on the projected value of the property with the work completed. The advantage of this loan is that you can buy a home that needs a lot of work, but have only one mortgage payment, and you can complete the repairs after buying the home.
How do FHA-insured loans compare to subprime loans?
Subprime loans are loans designed for Florida homebuyers who don't have a strong credit history or can't qualify for a regular or prime loan. Florida lenders charge a high interest rate on subprime loans because the risk that a Florida homebuyer may not make their payments is high. Because FHA insures the FHA approved mortgage lender against this risk, the interest rates on FHA-insured loans are generally among the lowest in the market. Most subprime loans carry interest rates at least 3 percentage points higher than a Florida FHA-insured loan. On a $100,000 mortgage, the monthly payment for a subprime loan would be over $200 a month higher than an Florida FHA-insured loan.
How do FHA-insured loans compare to conventional loans?
Conventional loans usually require a larger down payment than FHA and if you have less than perfect credit you may not qualify for an affordable Florida mortgage with a low interest rate. The best thing to do is compare the cost of the conventional loan to an FHA-insured loan line-by-line.
Do you have to buy mortgage insurance on an FHA-insured loan?
Yes - as you will with most loans. The Housing and Economic Recovery Act of 2008 provides for a one-year moratorium on the implementation of FHA's risk-based premiums beginning October 1, 2008. Consequently, effective with new FHA case number assignments on or after that date, FHA will no longer base its mortgage insurance premiums on a combination of credit bureau score and loan-to-value ratio. The new premiums (upfront and annual) to be implemented for all loans for which a case number is assigned on or after October 1, 2008, are described below. Mortgagee Letter 2008-16 is rescinded in its entirety. Please note that certain parts of that mortgagee letter are retained and reiterated in the guidance that follows.
Upfront Premiums: FHA will charge an upfront premium in an amount equal to the following percentages of the mortgage:
- Purchase Money Mortgages and Full-Credit Qualifying Refinances = 1.75 Percent
- Streamline Refinances (all types) = 1.50 Percent
Annual Premiums: An annual premium of .55% , to be remitted on a monthly basis, will also be charged based on the initial loan-to-value ratio and length of the mortgage (except for FHASecure delinquent mortgages)
Most loans require mortgage insurance when your downpayment is less than 20% of the sales price. On conventional and subprime loans, mortgage insurance is provided by private companies. Whether private mortgage insurance is less than, equal to, or more than an FHA-insured loan's insurance will depend upon the loan program and your qualifications.
Compare the cost of FHA to subprime and conventional types of loans over the life of your loan. Then compare how much each one costs monthly. With the protection and value you get from FHA ' you will see that it's a very good deal for Florida homebuyers and homeowners.
About the Author:
Thomas Martin 1st Continental Mortgage http://www.fhamortgageprograms.com/Florida
