Federal Housing Administration mortgages receive government support to protect lenders in case of default. However, for this support, the FHA charges mortgage insurance premiums, which work similarly to private mortgage insurance. Know when the annual mortgage insurance premiums are going to fall, helps you better budget for the cost of the mortgage. Check how to apply for a FHA home loan
Avoid Monthly Premiums
You can avoid paying annual mortgage loan premiums on your FHA mortgage if you take out a mortgage with a term of 15 years or less and make a down payment of more than 10 percent. You calculate the percentage of your down payment by dividing the payment amount by the value of the house. For example, if you took a 15 year mortgage on a $ 200,000 home, you would have to deposit at least $ 20,000 to avoid FHA annual premiums.
If you take out a mortgage with a term of more than 15 years or a loan-to-value ratio of more than 90 percent, you must pay annual premiums for mortgage loan insurance until your loan-to-value ratio falls below 78 percent. For mortgages with a term of 15 years or less, premiums fall as soon as you reach 78 percent, no matter how long you have had the mortgage. For mortgages with terms of more than 15 years, you must pay premiums for at least five years, even if your loan-to-value ratio falls below 78 percent in a shorter period of time.
Loan To Value Ratio
The loan-to-value ratio measures the ratio of the amount remaining on your mortgage to the value of your home. For example, if the balance of your mortgage is equal to $ 190,000 and the value of your home is equal to $ 200,000, divide $ 190,000 by $ 200,000 to find your loan-to-value ratio equals 0.95, or 95 percent. As you pay off your mortgage or the value of the home increases, the loan-to-value ratio decreases.
Why would mortgages fall through?
When you submit a mortgage application, your lender approves you for the loan based on the information you provide. Once the mortgage process starts, the lender can cancel the loan if problems emerge related to the house used as collateral or your ability to repay the loan. It normally takes between 30 and 60 days to process a loan, and a problem that causes the mortgage to fall through may occur at any time.
As part of the mortgage underwriting process, your lender hires a real estate appraiser to determine the value of your home. If the valuation comes short, which means the amount of your proposed loan exceeds the value of the property, you can not proceed to loan. In addition, if you are applying for a loan insured by the Federal Housing Administration, the assessor must report any security issues, such as loose leads, that he discovers during the process. If the current owner and you can not reach an agreement on fixing these issues, the loan will fall through because the FHA does not approve the loans once all the security issues have been corrected.
You do not have to order a home inspection, but many potential buyers order one before finalizing a home purchase, such as a home inspection involves a state-certified inspector conducting a home inspection. detailed examination of the property. Sometimes problems such as mold, termite infestation or a hole sink sink emerge during home inspections. These issues are often extremely expensive to remedy and many homeowners and lenders refuse to advance purchases when such problems emerge.
Most lenders can not include verifiable forms of income in your mortgage application. This means that if you can not prove your income by providing tax returns, W2s or proof of employment, your lender will decrease the loan. Lenders normally check your job by contacting your employer during the early days of the mortgage process. However, many lenders contact your employer for a second time just before closing the loan, and if you do not work anymore, the lender can cancel your mortgage.
If your mortgage process takes more than 45 days, your lender will normally check your credit report for a second time. If your credit score has fallen below the minimum acceptable level, your lender may refuse the loan. Other issues that can cause mortgages in the fall include through evidence of unpaid liens on the property that are discovered during the title search. Damage to a home caused by a storm or natural disaster can also make a property ineligible for funding.