A Guide to Single-Family Home Mortgage Insurance

Shopping for an FHA-Insured Loan After you have found the home you want to buy, you should call various lenders listed under "Mortgages" in the Yellow Pages to find the lender offering the best terms. The costs associated with a loan can vary significantly from one lender to another. It pays to comparison shop for a mortgage. The most important factors to consider in comparing loans are: • Interest Rate • Discount points • Closing costs and other fees, such as charges to originate the loan, commitment fees to "lock in" the mortgage terms you and the lender have agreed to for a certain period, and mortgage insurance premiums (MIP). • Annual Percentage Rate All of these factors are negotiated between you and your lender. HUD does not establish minimum or maximum amounts for the interest rate, discount points, or most processing fees you pay your lender. Interest Rate The interest rate a borrower pays for the mortgage is negotiated between the borrower and the lender. Interest rates fluctuate daily, depending on conditions in the mortgage market. It is always a good idea to check with several mortgage lenders to make sure you are getting the best interest rate available. The following chart shows how the principal and interest on your mortgage will vary according to the interest rate. Monthly Payment for Principal and Interest on a 30-Year Fixed Rate Level Payment Mortgage Mortgage Amount Interest Rate 7.0% 8.0% 9.0% 10.0% $40,000 266.40 263.60 322.00 351.20 $50,000 333.00 367.00 402.50 439.00 $60,000 399.60 440.40 483.00 526.80 *$70,000 466.20 513.80 563.50 614.60 *$80,000 532.80 587.20 644.00 702.40 *$90,000 599.40 660.60 724.50 790.20 *The maximum FHA-insured mortgage is $115,200. In areas where the cost of housing is high, the limit may go up to $208,800. Initial Investment (Down payment) The borrower's initial cash investment is the difference between the amount of the mortgage and the total cost of the home. The total cost includes the purchase price plus closing costs, but it does not include prepaid items that you have to pay at settlement, such as real estate taxes and hazard insurance. Most FHA programs require the borrower to invest a minimum of three percent of the total property cost. Discount Points Lenders can charge discount points to borrowers. A point is $1 for every $100 of the mortgage amount. Points are charged when the interest rate is lower than the yield required by investors who buy mortgage securities. (Yield is the ratio of investment income to the total amount invested over a given period of time.) Securities are "packaged," usually in portfolios of $1 million dollars or more, and bought and sold in the financial markets. This creates additional mortgage money to lend to other homebuyers.

...Continued - Page 2 of 7 ( 1 2 3 4 5 6 7 )
< Previous Page | Next Page >