Who is insured by FHA Mortgage Insurance and what are the benefits? FHA's mortgage insurance is insurance coverage that protects lenders against some or most of the losses that can occur when a borrower defaults on an FHA mortgage loan. The Housing and Economic Recovery Act of 2008 requires FHA Mortgage Insurance on all new FHA loans. This insurance coverage is purchased and paid for by the borrower. The cost of mortgage insurance may include an up-front premium that is included in the mortgage amount as well as an annual premium that is collected monthly and added to the borrower's mortgage payment. The amount and duration of payment is based on the loan type, loan term, and loan amount to property value ratio. Borrowers benefit from the FHA insurance in the following ways: Easier to Qualify: Because FHA insures your mortgage, lenders may be more willing to give you loan terms that make it easier for you to qualify. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan. Low Down Payment: FHA loans have a low 3.5% down payment and that money can come from a family member, employer or charitable organization as a gift. Other loan programs don't allow this. Costs Less: FHA loans have competitive interest rates because the Federal government insures the loan. Always compare an FHA loan with other loan types. Helps You Keep Your Home: The FHA has been around since 1934 and will continue to be here to protect you. Should you encounter hard times after buying your home, FHA has many options to help you keep you in your home and avoid foreclosure.
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