Why Apply For a Government Insured Mortgage?
Posted by: real estate / Category: Mortgage RefinanceThe purpose of this article is to help dispel the rumors and the misinformation feeding the public right now. Sources like the media particularly are blowing things way out of proportion (surprising, I know) and causing the circulation of garbage talk around the workplace, around the baseball parks, at the church coffee hour and everywhere in between. Some media outlets and other sources have people believing that there is no mortgage money out there at all, or that to buy a house one must have 20% down and impeccable, squeaky clean A+ credit scores. With this article you will learn and see first hand how none of this at all is even remotely close to the truth. The federal government WANTS to stimulate home ownership and home buying everywhere. Through government insured lending programs like USDA Rural Development, FHA and the VA, approved buyers can finance homes with little or NO money down and still keep their payments close to what they were paying in rent. And no, getting approved is not like getting teeth pulled! Getting approved can be easy as pie!
It is important to know that the Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer’s credit approved. These lenders fund the mortgage loans which the Department insures. HUD does not make direct loans to help people buy homes. Many home buyers do not realize this and its importance in the role of mortgage lending. The Veteran’s Administration operates in a similar way, meaning the VA won’t actually make the loan, but rather insure a lender who makes a loan under certain guidelines against borrower default. USDA Rural Development also “guarantees” the lender against default (the same as “insure”, basically). That is what is implied with the term USDA Rural Development Guaranteed Financing.
Also importantly, one of the biggest features of government lending is the lenient down payment and closing cost requirements. Remember, the government wants you to own a home. It benefits the economy and society at large when more people own their homes. It stimulates and sustains consumer spending and so on. Therefore, they make it as easy as possible, while also remaining steadfastly responsible in their insurance and lending policies to home owners. With FHA financing, an approved buyer needs only 2.25% down. The VA requires no down payment at all, nor does USDA Rural Development. And while the term “rural” seems to imply that the property must be rural, it actually does not need to be. It’s a matter of classification or definition, really. But any credit approved applicant buying a home in the suburbs or outward and who is not too far above the median income average for the area will qualify for a USDA no money down program. Interest rates are as low as anywhere, in the mid 6s on 30 year mortgages as of this week.
In many of my seminars I reveal a side by side cost and payment scenario comparing traditional (Fannie Mae/Freddie Mac) financing with government insured financing such as an FHA mortgage. The comparison reveals that on a purchase of a $200,000.00 owner occupied single family home by an applicant with the necessary income and employment documents and a credit score of 639 that by using an FHA mortgage the buyer receives an interest rate of over one percentage point lower than otherwise and also saves $300.00 per month! Yes, that’s $3600.00 per year. That buys a lot of holiday presents!
In summary, government-insured mortgage lending is simply “where it’s at” when it comes to imperfect loan applications, like those with less than 20% down and with credit flaws.
As always, I’m here to help!
~ Jamie
For more, visit http://activerain.com/blogs/jpsunshine
Jamie_Woods
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Things to know:
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2. Get a credible and well informed estate broker that could give you information about the best mortgage lenders. Do a proper research on few of them and establish a relation with at least two of them. This might involve opening account with the two. This… Continue reading
Since 2007 the housing market has been in turmoil.
Lenders stopped lending, house builders stopped building and home owners have slid in to negative equity.
Month after month house prices have slipped making the average price of a property in the region of 20% less than it was at peak. Only in recent months have the declines in the monthly falls really been noticed.
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With these first time home buyer grants from the government, new home owners can get down payment assistance to help them purchase their brand new home. This is funding that is provided to tax paying citizen, generally through local government agencies, and can be obtained regardless of income or credit.
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OWN: Your home builds equity for your future. You can use equity to move up to a new larger home one day, or to help send your children to college.RENT: No equity is built, no matter how long you rent. It’s like pouring money down the drain.
OWN: You control your monthly payment.RENT: Landlord controls payment.
OWN: New home buying tip: mortgage interest is tax-deductible. The government’s loss is your gain.RENT: No tax benefits.
OWN: A nice, safe backyard for children to play. You have room for pets, and also a garden.RENT: No backyard, no garden. Often pets not allowed.
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Tags: Buying a Home, mortgage, mortgage loan, mortgages