FHA home loans: they can make wannabe homeowners’ dreams come true by allowing them to buy a house even if they don’t have an 800 credit score, or they can’t afford a full 20% down payment. But here’s a fun fact we’d like to share with everyone: FHA loans aren’t actually offered by the FHA. Nope. The FHA just insures the loan, protecting the actual lender against our potential default. But the FHA wants a little protection too, which is why we (the FHA-loan-having homeowner) are asked to pay something called “up-front mortgage insurance,” or “UFMI.”
UFMI is a premium that’s usually assessed as soon as we secure the loan for our new house, and for the most part, it’s equal to 1.5% of our loan amount. So if we took out a home loan for $250,000, we’d have to pay $3,750. Sounds like a lot, but it’s a lot less than a standard down payment would’ve been. Even if we end up paying the $3,750 plus a 3% down payment on the house (as some FHA loans require), that’s still a whole lot less than a 20% down payment.
The bad news is that we have to pay our UFMI in full before we close on the house (though occasionally we can just get it added to the mortgage itself). The better news is that, in some cases, we can get some of it back if we end up selling the house within a certain amount of time.
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Finance: What is a Mortgage?345 Views
Finance allah shmoop shmoop What is a mortgage Well people
a mortgage is just dead it's alone but one with
special tax treatment For most people simply put Any interest
you pay on a mortgage to buy a home is
tax deductible Morty morton's inputs down a hundred thousand bucks
to buy a home that costs four hundred big ones
his mortgages three hundred grand at five percent interest per
year So that's fifteen thousand dollars a year he pays
to rent the money from the bank which he uses
to buy his dream home with the loop de loop
waterslide Morty earns one hundred grand a year and pays
tax on his last fifteen thousand of earnings soas faras
The irs is concerned since morty can deduct his fifteen
thousand dollars in interest against his earnings he does not
in fact earn taxable wages of one hundred grand annually
Instead he earns taxable wages of eighty five thousand dollars
a year Essentially with government is doing is sharing in
some of the cost of renting the money Taub i'm
ortiz home well why would the u s government be
so charitable Well because home ownership has been integral part
of the american dream since the u s of a
i po'ed in seventeen seventy six easy access to mortgages
and then home buying can be a hugely beneficial asset
In the vast majority of cases homes create family stability
a store of wealth and tax dollars for local schools
in the form of real estate taxes So don't feel
bad about splurging on that water slide there Morty Just 00:01:42.93 --> [endTime] remember you're doing it for the kids Hello
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