FHA Mortgage

For many St. Louis home buyers, the biggest obstacle to owning a home is the down payment. Understanding what mortgage insurance is can be of great benefit!

You may have heard the term “mortgage insurance” but what is it? Do you need it and how can you get it?

What is Mortgage Insurance?

Simply put, mortgage insurance is an insurance policy that protects the lender against losses should the borrower, or homeowner, default on their mortgage payments.

It is typical for lenders to require mortgage insurance for loans that have a down payment of less than 20%. This gives them a financial guarantee should the home loan go into foreclosure. With mortgage insurance, many lenders will not require a 20% down payment.

However, most mortgage insurance companies have very strict guidelines for a lender to follow making it difficult for people with a less than stellar credit score to secure funding.

A St. Louis FHA Loan

The FHA, or the Federal Housing Administration is not a lending institution. Rather, they provide insurance to lenders who are willing to grant mortgages to high risk buyers. So, a St. Louis home buyer that has a below average credit score has a real opportunity of owning their own home!

An FHA loan promotes home ownership by overlooking some of the flaws a potential buyer may have when they approve a mortgage. What this does is gives the lender the peace of mind to move ahead with the application because they have the reassurance that it is backed by the FHA.

The buyer will be required to make an initial payment toward the mortgage insurance, which is about 1.75% of the loan amount. In addition to this, there will be a monthly premium, or MIP, on the mortgage statement each month. The amount of the mortgage insurance is directly related to how much of a down payment a person is able to make towards the purchase of their new home.

In the event that a person is not able to continue making their loan payments, the funds that have been collected through the insurance payments will be used by the FHA. A lender is more willing to work with a buyer that has this kind of security behind them, even if their are flaws in their credit history.

Ask a Sean Z Mortgage Expert!

The FHA offers a variety of options for St. Louis home buyers, the most popular being the FHA 203B mortgage and FHA 203K mortgage. Ask your Sean Z mortgage expert for more details about which loan will work best for your circumstances. We are committed to making sure that you are able to receive the funding you need, whether for a home in mint condition or one that needs extensive renovations.

Call us today at (314) 362-9979 or fill out our online contact form. We are proud to be able to offer a full line of FHA loans to St. Louis home buyers.

Homeowners may save thousands of dollars on their home mortgages!

In January, the Federal Housing Administration (FHA) announced a policy change that could save homeowners thousands of dollars on their home mortgages. The annual personal mortgage insurance (PMI) premiums will be reduced by 50 points.

What is Personal Mortgage Insurance?

Personal Mortgage Insurance (PMI) is an added safeguard for financial institutions who loan money for housing with little investment from the buyer. Generally, PMI is required when the down payment amount is less than 20% of the property value. The insurance premium is added to the base value of the mortgage and paid monthly along with the premium and interest.

In an effort to ensure responsible lending to creditworthy borrowers, the annual rate for PMI will drop to 0.85% from 1.35%. This may also be beneficial for renters to find housing at a lower monthly fee. For the typical first time home buyer, the reduction in PMI could mean as much as a $900 savings each year.

Will This Change In PMI Policy Affect Those Who Already Have a Mortgage?

For those homeowners who have recently obtained an FHA, they will see an immediate change in their monthly mortgage payments. The savings will amount to $41.67 per every $100,000 borrowed. When you consider that amount applied to the number of months a homeowner is obligated to make the PMI payments, the savings from the reduction are significant. Speak with Sean Z Mortgage today to find out if refinancing your existing mortgage will give you access to the reduced PMI rates.

This reduction is not only a positive move for the homeowner with an FHA loan, it is an excellent move to help in stimulating the housing market. The one criticism that these types of loans have traditionally received was the high insurance premiums that came with the advantage of a low down payment. With this reduction in rates, a home owner can put down 5% or 10% and not have to pay for that benefit with high insurance premiums.

Can This Change Help You Become a Missouri Homeowner?

If you have been making plans to buy a home in Missouri but do not think you are financially ready, bring your concerns to the Sean Z mortgage team who can help you make a viable plan to home ownership and even help you decide if you are ready now. There are a variety of FHA loans available and you may qualify for one right now.

With some FHA loans, you can be approved with a deposit as low as 3.5% and a credit score of 580. That is a big difference from the 640 or better that many banks insist on. Closing costs are also a concern with a first-time home buyer, but with some FHA loans, the seller is allowed to pay up to 6% of that cost. This could give the buyer extra money to cover the costs of moving and setting up a new home.

This is big news for homeowners and the real estate market! By lowering this premium payment, having a house of your own may finally seem like an attainable goal. Call USA Mortgage today at (314) 361-9979!

St. Louis Mortgage, USA Mortgage, Mortgage Rates

USA Mortgage - Sean Zalmanoff - Sean Z Mortgage

St. Louis Mortgage Expert Answers: What is Mortgage Insurance?