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Federal Housing Authority (FHA) Mortgage Insurance
Mortgage insurance is required on all FHA loans.
The insurance is collected by the lender and paid
to FHA which in turn reimburses lenders in the
event of a loan default. MMI & MIP are the
two different types of FHA mortgage insurance.
Mutual Mortgage Insurance (MMI) is collected monthly
on approved condominiums. Insurance is paid on
the remaining balance of the loan only; therefore,
the payment will decrease gradually over the life
of the loan. Mortgage Insurance Premium (MIP)
is a one time fee of 2.25% of the loan amount
that applies to Single Family Residences (SFR)
and Planned Unit Developments (PUD). This fee
can be 100% financed and added to the base loan.
SFR's and PUD's also pay monthly MMI.
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FHA Appraisals
FHA uses the same appraisals for all programs.
The appraisals (or Conditional Commitments) are
done by FHA assigned/approved appraisers and set
forth FHA's estimate of value. If the appraisal
is at a value lower than requested by the seller,
a reconsideration of value may be requested by
sending to FHA recent comparable listings indicating
a higher value, or the buyer may pay the additional
difference.
Co-Signer
FHA allows a borrower to use a non-occupying co-signer
for purposes of qualifying for the loan. The co-signers
income, assets, liabilities, and credit history
are included in the determination of creditworthiness.
The co-signer must be a blood relative or, for
unrelated individuals, documented evidence of
a family-type, long standing substantial relationship
not arising out of the loan transaction must be
provided.
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