 | Randy Vickers is the owner of Priority Mortgage Corp of Wichita, which opened in Jan. 1989, is the oldest locally owned mortgage company in Wichita. Randy has been in the real state business since 1983 and is a licensed real estate broker as well as a licensed mortgage broker. Priority Mortgage Corp of Wichita KS Lic #1996-0122. Randy can be reached at 316-721-7700 |
Real Estate
2005-11-01 16:19:00
Loans: FHA vs. conventional
: What are FHA loans and what are their benefits compared to conventional loans?
ANSWER: Anyone who meets the credit requirements, who can afford the monthly mortgage payments and cash investment, and who plans to use the mortgaged property as a primary residence may apply for an FHA-insured loan. One of the benefits of an FHA loan is the fact that they are assumable at a later time by a qualified future buyer. You can assume an existing FHA-insured loan, or, if you are the one deciding to sell, may allow a buyer to assume yours. Assuming a loan can be very beneficial, since the process is streamlined and less expensive compared to that for a new loan. Also, assuming a loan can sometimes result in a lower interest rate. The application process consists basically of a credit check, and no property appraisal is required. You must demonstrate that you have enough income to support the mortgage loan, typically 30% of gross income for house payment and not more than 43% of gross in income for all debts. In this way, qualifying to assume a loan is similar to the qualification requirements for a new one.Except for the addition of an FHA mortgage insurance premium, FHA closing costs are similar to those of a conventional loan. Conventional loans exceeding 80% of the purchase price also require private mortgage insurance. The FHA requires a single, up-front mortgage insurance premium equal to 1.50% of the mortgage to be paid at closing. In most cases this amount is financed into the new loan. After closing, you will then be responsible for a monthly premium of mortgage insurance. FHA loans are often used in combination with "First Time Homebuyer" programs and down payment assistance programs. These programs keep the upfront cash requirement to a minimum.There are mortgage options now available that only require a down payment of 5% or less of the purchase price. There are even 100% loans with approved credit. There are programs that allow you to buy a home with nothing at all, or very little, out of pocket. The larger the down payment, the less you have to borrow, and the more equity you'll have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan. When considering the size of your down payment, consider that the monthly payment is affected by about $6/month per thousand you do, or do not, pay as down payment, for a 30 year mortgage.…More next month…
