The ability to purchase a home for minimal down is not something that home owners are likely to take for granted in today's housing market. FHA is going to play a large role in helping home owners refinance their loans or new buyers purchase their first homes. FHA or the Federal Housing Administration has been in existence for over 50 years and helps millions of borrowers with mortgage loans. FHA does not directly lend money to consumers. Their role is to insure the transaction and allow lenders to underwrite loans to certain standards, which then allows the lender to mitigate their risk as well. FHA makes money by charging the borrower mortgage insurance. There are two types of mortgage insurance that every borrower must pay. The first insurance is called "up front mortgage insurance" and is equal to 1.5% of the loan amount. This portion can be added to the loan balance on both refinance and purchase loans. In addition, the borrower must pay .50% to .25% monthly, for the first five years they have the loan, depending if they have a thirty year (.5%) or 15 year mortgage (.25). On a hundred thousand dollar loan this is approximately $ 42 per month for a thirty year term.. This insurance is critical as it allows the lender to offer the loan programs and borrowers to qualify without a 20% down payment.

5-15-2008©LowRateMortgage.com

Compare free quotes from top lenders to find  the lowest mortgage rates online

LowRateMortgage.com is not a bank, broker or direct lender and is strictly operating in an advertising capacity.

LowRateMortgage.com is a MarketingRelationship.com, LLC company