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FHA Mortgage Insurance: What is it? and Why do we need it?

FHA mortgage insurance is charged two ways, upfront and monthly.  When you compare it to conventional PMI, it is generally MUCH less expensive. 

It provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner's default, this allows the lenders to take more risks and help more low credit borrowers buy a home or refinance

The loans must meet certain requirements set  by FHA to qualify for insurance.

Why does FHA Mortgage Insurance exist?

To help more people qualify for home loans plain and simple.   The insurance is in place to pay claims on the defaulted loans that occur.   If there were no insurance, lenders would lend to only those who had great credit and a lot of money down.    Not everyone in this country is fortunate to have not have had any financial issues in their life.   Take a look at FHA verse Conventional financing and the mortgage insurance differences here.

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* Terms and Conditions Apply - Rate referenced above is guidance and is based on available rates from our lender network as of December 16, 2011 for a 7/1 adjustable rate refinance, a loan amount of $250,000 in Virginia, 2.675 discount points, at least 20% equity in the subject property, a single-family home, primary residence, minimum 740 credit score and verifiable income for the borrower(s). Rates mentioned in any advertising are guidance and are based on a sampling of available rates from our lender network. FHAInfoCenter  is not a lender. Specific rates and terms offered to our applicants by specific lenders and providers within the network may vary, though our lenders and providers understand they are in a competitive environment and offer highly-competitive rates directly to our applicants. Rates are subject to change daily without notice. Not available in all states. Payment amounts shown do not include taxes or insurance.



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