Loan Modification

Low FHA mortgage rates boosting affordability

By Karen Lawson

Reports of rock bottom mortgage rates continue to dominate news on US housing. Lower mortgage rates offer home buyers and homeowners wishing to refinance an opportunity to get the home financing they need at lower cost. Affordability for financing benefits borrowers in three ways:

• Lower payments: Lower mortgage rates lead to lower payments. You can use mortgage calculators for estimating principle and interest (P&I) payments for the mortgage amount you need. Mortgage lenders may require additional amounts for payment of property taxes and insurance, but estimating P&I payments provides an idea of how mortgage rates can impact payment amounts.
• Paying off your mortgage faster: Lower interest charges mean that more of your monthly payments will go toward paying down your mortgage balance. Low monthly payments also promote paying additional amounts toward your mortgage balance. The faster you pay off your mortgage loan, the more money you’ll save. FHA guidelines do not include prepayment penalties; you may make additional principle payments without incurring additional costs.
• Building home equity: The faster your can reduce your mortgage loan balance, the more equity you will have in your home. This assumes that your home value isn’t declining, and that you don’t have a home equity loan or line of credit. Home equity is an important benefit of owning a home. The difference between your home’s current value and the balances of mortgage loans owed against it is the approximate amount of your home equity. FHA borrowers typically start out with very little home equity; lower mortgage rates can assist with building home equity as more of each payment is applied toward your mortgage balance.

Shopping FHA loans: Compare APR amounts

Focusing on mortgage rates alone doesn’t provide the full picture of how much a mortgage loan costs. Instead, look for the annual percentage rate or APR, which is posted on mortgage quotes. Although the APR doesn’t include all costs applicable to a mortgage loan, it provides a more accurate estimate of the cost. Evaluating FHA mortgage quotes line by line can help with identifying excessive and/or negotiable costs. Lender fees, document fees, and “points” are examples of fees that can vary between mortgage lenders.

FHA Loans: Buying your first home? Housing counselors can help

Shopping for mortgage loans can be confusing due to the complexity of the process. Contacting a HUD approved housing counselor can help. These agencies work with home buyers and homeowners to provide information and resources that can make the process of applying for a mortgage easier. Housing counselors can also direct you to local resources such as local home buyer programs and low cost loans for home renovation.

Full post as published by FHA Mortgage Guide on October 07, 2010 (boomark / email).