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|FHA Insurance programs are available for mortgage loans you obtain from an FHA-approved lender. The risk that a lender undertakes while underwriting a mortgage loan for a borrower with less-than-perfect credit at low down payment and competitive rates is fully covered under an FHA insurance program. The lender gets the security of not losing his/her money and the homebuyer gets the amount he needs under more manageable terms. This is what the Federal Housing Administration seeks to achieve through a mortgage insurance program.
FHA Insurance Premium
FHA Mortgage Insurance Premium (MIP) is usually more than what you pay for private mortgage insurance (PMI) under a conventional mortgage. Moreover, there is an upfront insurance premium, which a borrower needs to pay at the time of purchase. It is possible to finance this premium amount under certain programs. In addition, there are annual premiums, which are applied to borrowers’ regular monthly payment. The complete FHA insurance premium structure can be found in the FAQ section of fhaoutreach.gov. Furthermore, the premium amount may be tax deductible if the transaction was closed after the year 2007. For more information regarding this aspect, you should contact the Internal Revenue Service (IRS) or consult a professional tax expert.
FHA Insurance Premium Refund
In most cases, a borrower needs to continue paying mortgage insurance premiums until the loan-to-value ratio reaches 78%. Your MIP will automatically be terminated after this stage if you have paid the MIP for at least five years. Under certain conditions, such as prepayment, you are allowed to make request for premium cancellation. All this money is collected in an escrow account and is paid to the lender when you default on mortgage. In the event of you being current throughout the loan term, you may be eligible for an FHA insurance premium refund after a stipulated time period. HUD owes this money to you and wants to pay you back if you qualify for the same. To know more about this, you may either call HUD’s MIP Refund Center at (800) 697-6967 or mail to the following address:
U.S. Department of Housing and Urban Development
P.O. Box 23699
Washington, DC 20026-3699
Your claim application should contain your name, FHA case number, the property address, the date you paid your mortgage in full and your contact number.
FHA Insurance Requirements
Under an FHA program, you can obtain a home loan by putting down as low as 3.5% of home value. This is seldom a possibility under a conventional mortgage option, where you need to put down at least 20 percent at closing. Even if you are paying less than this amount, your will have to take private mortgage insurance (PMI) from a third-party insurance company. FHA insurance premiums may be more than the premiums you pay under PMI, but the benefits you receive in terms of coverage, interest rates, payment and other underwriting requirements are far more than a conventional mortgage. This is what makes FHA mortgage insurance a popular option, with nearly one-third of the borrowers in US mortgage market showing preference for this.