Everything You Need To Know About FHA Mortgages

house_38Many people hear the words FHA mortgage with 3.5% downpayment but don’t understand exactly what an FHA mortgage is or even what the FHA is!  This article should help clear up many of the questions of today’s homebuyer when faced with the decision to take an FHA mortgage.

What Is The FHA?

The FHA is actually the Federal Housing Administration and is a division of the US Department of Housing and Urban Development.  The purpose of the FHA is to insure loans made by the private investment market and provide access to affordable financing when the private market will not make the loan without insurance.

Are There Benefits And Faults of FHA Financing?

There are definitely benefits because an FHA insured loan allows many borrowers, who would otherwise not qualify for a mortgage, to purchase a home of their own.  The 3.5% downpayment is a bonus for many people who can afford the monthly payments but are not good at saving large downpayments.

The faults are that there is a premium attached to borrowing the money and having it insured by the government.  There is a 1.75% up front premium in the closing costs of the mortgage and an annual premium which is paid monthly with the mortgage payment.

How Has FHA Helped While The Housing Market Has Been In Trouble?

“During the economic recession and housing downturn, FHA has been one of the only sources of mortgage financing available to buyers,” says Sarah C. Young associate regulatory policy representative at the National Association of Realtors.  She continues, “The private market largely abandoned housing finance, but FHA did not.  In fact, FHA provided access to home ownership for more than 2.8 million first time home buyers in the last four years.”

Therefore, without the FHA mortgages many buyers would not now be living in homes of their own in Naples Florida and the rental crisis would be even worse.  Usually the monthly mortgage payments including the premiums are lower than most people would pay to rent that same house.

Is The FHA Financially Stable?

Because the FHA has always used careful underwriting in providing mortgages it was able to stay reasonably financially sound during the mortgage crisis.  There were many financial losses during 2007 to 2009 because of the housing market collapse which has placed a financial burden on the FHA.  However, it’s current cash reserves total $20.4 billion according to the division of Housing and Urban Development and there is still money available for people who qualify for an FHA mortgage.

Want To Know If You Qualify?

The best place to start is with a mortgage broker and I know some very good ones in Naples.  Please call me at 239-601-3174 or email me and I will help you pick the right mortgage broker for you.  Maybe, we can find you your dream home and you won’t have to pay your landlord’s mortgage any more, you can pay your own!  Call me today and let’s get started.

Remember, it is always toasty in Naples and you deserve your piece of Naples sunshine.

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