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Unformatted text preview: n a 5 percent down transaction would have the borrower pay $41.66 per month additional insurance premium to the FHA for thirty years $100,000 x 0.005 = $500112 = $41.66 Although FHA managers maintain that their reserves, plus access to the U.S. Treasury, would be adequate to survive the current crisis, the new plan for higher costs should build up the reserve account and offset increased buyer defaults in the future. In an effort to limit its vulnerability, the FHA has discontinued insuring loans on vacation or second homes; or non–owner–occupied properties. It is interesting to note that the FHA program was originally designed to help persons with low down payments qualify for loans with which to purchase homes and other real estate. By raising costs and down payment requirements, it may become comparatively less expensive to secure a conventional loan and the FHA program may see its original purpose disappear. ADVANTAGES OF FHA
Low down payment – With the higher LTV, the borrower is required to make a lower down payment. The down payment may be as little as 3 percent of the appraised value, but the usual down for the standard fixedterm, fixed–rate mortgage insured by FHA is 3 percent of the first $25,000 of appraised value, 5 percent of the next $100,000 and 10% on the amount over $125,000 to the maximum loan amount that will be insured by FHA in a specific area. 5-24 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 5: GOVERNMENT PARTICIPATION & BACKED LOANS
This method of calculating the required down payment applies to properties that have been constructed for one year or more or were constructed under FHA inspection. For those homes that are less than one year old or were not inspected during construction by FHA and/or VA, the required down payment is 10 percent of the value. Even though there is a difference in the down payment, the maximum loan amount is the same. The usual down payment...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10