FHA Loans: Why an FHA Mortgage to Buy a Home?

The Federal Housing Administration (FHA) has one of the best mortgage programs in the mortgage market place today due to the contraction in the mortgage lending industry over the last 1 1/2 years. Sub prime loans are gone, most jumbo loans are gone, and most second mortgage loans used to help with down payments are gone.

Fannie Mae and Freddie Mac have tightened their guidelines so tight and increased down payment requirements because of declining markets that most home buyers today cannot meet the requirements.

Even though FHA has also tightened it’s guidelines, it has not been to extent of the other mortgage programs that are still on the market. FHA, for the most part wants you to have a minimum middle credit score of 620. At one time, not too long ago, it was as low as 580. A 580 middle credit score is still available but with a higher interest rates and tighter lender underwriting standards.   You can see they have tightened up their credit requirements quite a bit. Beyond that everything that they have done has been to expand credit availability to more home buyers and protect the borrower from fraud and misrepresentation of property values.

FHA has increased the maximum mortgage amounts to help those with higher home prices in their area. At the same time, they have created a system that allows FHA approved appraisers to be chosen randomly so as not to be influenced by the lender, or a loan originator, or mortgage processor. This protects the borrower from paying more then market value at the time of purchase for the home.

FHA increased its down payment only slightly from 2.75% to 3.50% and increased the monthly MIP(Mortgage Insurance Premium) rate from .50% of the mortgage amount to .55% for loans with less then 5% down. The upfront mortgage insurance premium FHA charges increased from 1.75% to 2.25% for minimum down payment loans. These increases in insurance on the mortgage are off set by the higher down payment requirement so that the loan is of  higher quality without any significant increase in monthly payment net, net to the borrower. This keeps the buyers buying power the same. Come back next week for more about why an FHA mortgage. For a free mortgage pre-qualification and listings in Michigan go to dependablemortgageinc.com.