Understanding the Basic of FHA Mortgage Insurance
Article by Mortgage Guru
Many people find it quite difficult to be able to purchase their own home. This may be especially true during the current economic recession that left many people jobless while still being in debt. My friend Becky was looking to buy a home but she was earning minimum wage working as a bartender. She also discovered that mortgage guidelines were tightening up and banks or lenders generally would prefer higher credit scores or higher down payments. So what was she to do? She still wanted to buy a home but she needed some program or back-up to secure her place as a borrower even with her limited income. Basically she had to give the bank some kind of guarantee. That was when she discovered FHA mortgage insurance.Becky learned that she could have better chances of buying a home if the loan is backed by the FHA mortgage insurance. Generally the FHA would have the option of insuring her loan to your lender in the event of your default. Of course, the guarantee came from the government so the down payment requirements would also be minimized. The idea would be to make her loan more attractive to banks and buyers alike. The way FHA worked was almost the same as in the traditional lending industry. Becky wanted to buy her house through the FHA so she paid the insurance premium every month. What Becky did not quite realize was that the insurance was designed more towards preventing foreclosure by the lender. Of course the insurance would not cover herself but only the lender. It may be required for you to know how much you might need to spend in order to help determine your housing budget.Becky