FHA loan, Tucson is a great alternative for first time homebuyers as well as those who do not qualify for mortgages offered by the regular home loan lender. The U.S. Department of Housing and Urban Development (HUD) introduced these loans in 1934. Despite being around for more than 75 years, many homeowners in Tucson and other parts of the country still have many misconceptions about the FHA loan facility.
Common misconceptions include the FHA giving successful applicants money to buy their homes or the FHA setting out the interest rates on these home loans. Simply put, the Federal Housing Administration (FHA) is part of the HUD department and offers mortgage insurance on all loans that lenders give out to borrowers. This government agency has to approve all these loans. The agency cushions the lender against defaults by the borrowers. Because of government support, a FHA loan is easy to access and has overwhelming benefits compared to the regular mortgage product. For example, their percentage down payment is as low as 3.5 to four percent while the regular mortgage loan may require a down payment of as much as 10 to 20 percent.
Just like any other home loan, there is always a risk of borrower default. Studies conducted by the FHA indicate that borrowers who put down anything less than 20 percent as down payment have a higher probability of defaulting. The 3.5 percent down payment is indeed very low and as such, FHA loan Tucson is indeed a favorite of many first time homebuyers. The government issued mortgage insurance sees to it that lenders are able to stay in business even after sustaining heavy defaults on mortgages. Mortgage insurance is a typical FHA requirement for borrowers making anything less than 20 percent as a down payment.
A FHA loan, Tucson usually has two main types of mortgage insurance. The first type is the upfront mortgage insurance premium (UFMIP), which is payable once. Your monthly mortgage payments will not have the UFMIP. The annual mortgage insurance (MI) is the second type and affects most homebuyers the most. This is because is features in all monthly mortgage payments.
Most homebuyers are quite inquisitive on the length of time that they will continue footing the mortgage insurance. More often than not, the cost of mortgage insurance stays with the homebuyer for five or so years before dropping off. It might also drop off when the remainder of the mortgage loan balance hits the 78 percent mark of the total value of the house. Whichever situation lasts the longest, determines when you get relief from this cost. Recently, mortgage insurance premiums on all FHA loans reached new levels after a 25bps monthly raise.
FHA home loan in Tuscon is a great option for many homebuyers and homeowners looking to purchase or refinance. FHA home loans are specifically useful to borrowers who cannot make a big down payment, who want low monthly payments, whose credit is not great and qualifying for a conventional loan is difficult for them. For more information on FHA mortgage loans, visit Nova Home Loan.
