A commenter wrote yesterday, “John it sure seems like at the moment the FHA makes the most sense for a large portion of the market on the lower end. Without the 100% financing option this has become the popular choice amongst those with little money to put down …”
How an FHA loan works, and what your requirements will be, as a borrower, are explained in full, in a recent column on the excellent Mortgage Matters blog.
It starts below; click through for the complete response by young Holden Lewis, mortgage-master extraordinaire.
Q: We are first-time homebuyers. We are on the last process of buying a house. The cost of the house is $235,000. It is under FHA Insured Mortgage Loan. The interest rate is 6.375 percent with an APR of 6.693 percent. We already put down $2,000 as earnest money deposit and the seller agreed to pay $5,000 for the closing cost which will be taken out from the $235,000. When I e-mailed my loan officer how much do we need to come up with the closing, he said $13,000. Is it right? I thought we don’t need to come up with any money for the closing because it’s already taken care of by the seller. What can you say about this?
1. Do we need to get title insurance protection?
2. Is there a prepayment penalty in FHA loan. If there’s none, what’s the catch?
3. Our paper says that PMI will only be taken out as soon as we paid 78 percent of the price of the house. Is it correct? My friend just closed a deal in buying a house and the explanation to her is PMI will be taken out after she paid 20 percent of the price of the house.
Answer: FHA questions answered – By Holden Lewis, Mortgage Matters, Bankrate.com