Thursday, February 16, 2012

Interview with Mortgage Specialist Part 2: New Loan Programs

What are some new loan programs that people should be aware of?

One of the best programs is the FHA, which is the only government program that really works. It’s designed for people who are either just starting out, don’t have a lot of job history, might not have a lot of money, or who might have tarnished credit. The FHA will work with that, and by providing insurance against a borrower defaulting, lenders readily make FHA loans. Essentially the FHA is an insurance company where you, the borrower, pay them an insurance premium fee to insure the loan against default.
As much as I like the FHA, I can get a better deal for many borrowers without going through FHA. I can accomplish the same thing with lenders either with less costly private mortgage insurance or by getting the lender to pay for the insurance. The costs are dramatically less.

How much less are we talking about?
The FHA charges 1% of the loan amount upfront and 1.15% of loan amount for 5 years. I can do comparable programs with no insurance, or insurance that is about 1/3 of the cost of the FHA.
Personally I don’t believe there are legitimate first time home buyer incentives offered by banks. My experience is that banks who offer it typically mark up the rate then discount it so that it’s a false savings. Logically, what bank would want to give a first time home buyer an incentive over someone with a history of home ownership?

To See the Entire Interview CLICK HERE

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