|
How Home Mortgage Insurance Works
Many people in the United States dream of owning their own homes, but few are able to pay cash for them. Many individuals and families who could not otherwise afford to own a home become homeowners with the help of the mortgage insurance programs.
Buying a home is the biggest single purchase that most people will make in their lifetimes. Most people borrow money through a mortgage loan to buy a home. Some people reduce the amount of money they borrow by making a large downpayment on the loan to buy a home. Persons who do not have money for a large downpayment may need the help of an insured mortgage to get a loan.
Home Mortgage insurance programs help low- and moderate-income individuals and families obtain financing to buy homes or refinance their current mortgages. Mortgage insurance allows a homebuyer to make a low downpayment and get a mortgage loan for the balance of the purchase price.
The mortgage loan is made by a lender, such as a bank, mortgage company, or credit union. Insurance insures the mortgage and pays the lender if the homebuyer defaults on the loan, or fails to repay the loan.
Insurer does not make direct loans to people who want to buy, build, or refinance homes.
Who Can Get Home Mortgage Insurance
If you are buying a home, refinancing a mortgage for a home you already own, or making home improvements, you may qualify for an insured mortgage.
In fact, almost anyone who has a satisfactory credit record, enough cash to close the loan, and sufficient steady income to make monthly mortgage payments can be approved for an insured mortgage. There is no upper age limit and no certain income level required, although individual mortgage amounts are limited by law. Generally, homebuyers must live in the home in order to get an FHA-insured mortgage loan. The program is not open to investors.
To find a lender, search online. You can also find lending institutions in the yellow pages of the telephone directory under the heading "Mortgages."
To find out if you qualify for an insured mortgage loan, you should visit a housing counseling agency or a lender, such as a bank, credit union, or mortgage company.
The housing counselor or lender will look at certain information about your income and spending to determine if you qualify.
How Mortgage Insurance Can Help You
Whether you are buying a home, making home improvements, or refinancing your current mortgage, you should work with a lender such as a bank, a mortgage company, or a credit union-to apply for a mortgage loan. Once your loan is approved, insurance will insure the loan and pay the lender if you default on the mortgage. Because the lender is protected by this insurance, the lender can give you better terms on your loan.
A lower downpayment - Some lenders require borrowers to pay 10 percent or more of the price of a home in cash as a downpayment. With insured mortgages, your downpayment can be as low as 3 percent. The lender will likely require you to prove that you have enough money for the loan downpayment.
Use of cash gifts toward downpayment - With an insured mortgage, under certain circumstances you can use a gift from a relative, a local nonprofit organization, or a government agency for all or part of the downpayment and closing costs.
|
