Real Estate Fundamentals in Buying a Foreclosures

Mortgage insurance is fundamentally “foreclosure insurance.” With all the foreclosure news we have seen and witnessed since the housing market started slipping, mortgage insurance companies have really suffered a lot.

What happens here is that when a home buyer buys a house with less than a 20% down payment, they will be normally required to pay for a policy of mortgage insurance to cover the lender in the event of a default called Mortgage Insurance premiums. These mortgage Insurance premiums have been used with most FHA and conventional loans over the past three years.

Mortgage Insurance premiums have been used with most FHA and conventional loans over the past three years. These premiums are required to pay for a policy of mortgage insurance to cover the lender in the event of a default the moment a home buyer purchases a house.

The most recent FHA change this spring increased the upfront mortgage insurance cost to 2.25%. This made up front closing costs more expensive for borrowers. Because this makes it more difficult for people to buy homes in a time while the economy is struggling, FHA wants this amount lowered.

But the good news is that the up front mortgage will go down starting early this October. And the not so good news is that the Annual Mortgage Insurance premium is increasing from .55% to .9%. This has been duly approved by the Congress though with out requiring an additional vote to raise their annual fee to 1.55%.

Congress, however, has already approved FHA’s new policy to raise their annual fee to 1.55% without requiring an additional vote. As a result, the Annual Mortgage Insurance premium increased from .55% to .9% and so, the up front mortgage will go down starting October 4th

Since the higher monthly mortgage insurance payments is indirectly proportional to the debt to income ratio, a lot of mortgage lenders are puzzled as to how how people can afford to buy homes with the new FHA changes even though interest rates are at historic lows.

Buying homes can be a very complicated experience given the rising mortgage insurance that reduces qualified home buyers. However, make sure that you consult real estate experts who knew the ups and down, recent trends and changes. Get information from Homes for Sale in Virginia for Sale and Suffolk VA Homes for mortgage options and buying real estate.. This article, Real Estate Fundamentals in Buying a Foreclosures is available for free reprint.

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