Explanation of an FHA mortgage in 2018

Meet Dave’s and his family. Dave wanted to buy new home this year. He’s had some problems with his credit and
the house he wants to buy needs some major renovations. He works in construction, so renovating a
house is a walk in the park for Dave – but… the bank didn’t seem to think so! The bank won’t give him a mortgage And getting a private loan will cost him an arm and a leg Dave tried and tried, but wasn’t satisfied
with the result he was getting. Then he met with his old friend Sam who told
him about the Federal Housing Administration (FHA) loan. Sam says, “FHA is a government program that
insures mortgages for people who might have trouble getting a loan otherwise. Since the mortgage gets backed by the government,
lenders can feel comfortable lending money to all applicants. Even people like you, who had problems with
credit and make a humble income. The best part – you only have to put 3.5%-10%
down!” Wow. So what’s the catch? There’s not a whole lot, actually. Your loan can only go up to $295k (in most
cities) and your FICO score has to be between 500 to 580. You also need to show steady employment and
a 12-month record of on-time bill payments. Next to that, you just need some private mortgage
insurance and you’re good to go! That all sounds pretty good – Except private mortgage insurance. What’s that? In exchange for the low-down payment and credit leniency you have to pay two insurance Premiums – upfront and yearly. The upfront MIP is 1.75% of the total amount While the yearly premium is 0.85%. How much do you want to borrow? Ok, so if you are borrowing $200,000, your
upfront MIP will be $3,500 ($200,000 x 1.75%=$3,500) and your monthly premium will be
an extra $141.67 ($200,000 x 0.85% / 12 months=141.67). It seems like a lot, but it shouldn’t bother
you too much. The benefit of putting a small down payment
to get the home your family needs usually Outweighs the disadvantage of paying the FHA
MIP. You’re right Sam It looks like and FHA loan
is the only way for me to move forward. Hopefully things will go well at work and
eventually that premium will feel more affordable. Ya! And look at it this way Dave. Once you build up the equity and bring up
your credit score in a couple years, you could Probably refinance into something more conventional. Just make sure to use a mortgage calculator To view how refinancing would work out for you Now, Dave has the home he wants and uses Okcalculator.com for all his financing needs. Thanks for watching, please like our video, share and subscribe to our channel.

Paul Whisler

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