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The FHA home loan program is a popular financing option among borrowers in Washington and Oregon, our primary area of operation. This program offers the advantage of a relatively low down payment along with flexible qualification criteria.
Most borrowers who use an FHA loan to buy a house in Washington or Oregon have to pay mortgage insurance. This is a standard requirement put forth by the Department of Housing and Urban Development, or HUD. The insurance costs can vary based on several factors. Most borrowers pay an upfront premium equaling 1.75% of the loan amount, plus an annual premium of 0.85%.
There are actually two types of mortgage insurance associated with FHA loans in Washington and Oregon. There’s an upfront premium, as well as an annual premium. But don’t be intimidated by the “upfront” language being used here. In most cases, they can be rolled into the loan amount and paid on a monthly basis along with the principal payments.
But these premiums do increase your overall monthly mortgage payments, so it’s important to understand what they are and how they work.
FHA mortgage insurance premiums can seem confusing at first glance. That’s because there are a number of variables that can affect the amount you pay in FHA insurance when buying a house in Washington or Oregon.
Did you know: The FHA home loan program allows borrowers to make a down payment as low as 3.5% of the purchase price or appraised value. This attracts home buyers who have limited cash saved up for the down payment.
The Federal Housing Administration home loan program is actually built around insurance and in several ways.
The FHA does not make loans directly to consumers. Instead, the agency ensures home loans that are generated by mortgage lenders within the private sector. This protects lenders from losses that might result from borrower default.
Instead of relying on taxpayers to foot the bill for this program, the FHA requires borrowers (home buyers) to pay a mortgage insurance premium. These premiums fund the program allow the FHA to cover the claims it receives from lenders.
So without the mortgage insurance premiums paid by borrowers, the program would cease to exist and would no longer offer the benefits of a low down payment and flexible guidelines.
Will you need mortgage financing to buy a home? We serve the entire state, as well as the broader Pacific Northwest region that includes Oregon, Colorado, California, and Idaho. We offer many mortgage programs and products with flexible qualification criteria, including our Diamond Homebuyer Program, Cash Buyer Program, and Bridge Loans. Visit our website to get an instant rate quote or to use our online mortgage calculator. Please reach out to us if you are ready to get pre-approved for a mortgage.
Most FHA borrowers in Washington and Oregon must pay mortgage insurance. This usually includes an upfront mortgage insurance premium and an annual premium that is typically paid monthly.
The upfront FHA mortgage insurance premium is typically 1.75% of the base loan amount.
For many borrowers using a 30-year FHA loan with a down payment below 5%, the annual mortgage insurance premium is typically 0.85% of the loan amount.
In many cases, the upfront premium can be financed into the loan amount rather than paid out of pocket at closing.
FHA loans include mortgage insurance because the Federal Housing Administration insures loans made by approved lenders. The premiums help fund the program and protect lenders against certain losses.
No. The FHA does not lend directly to borrowers. It insures loans that are made by mortgage lenders.
FHA mortgage insurance increases the total monthly mortgage payment because the annual premium is usually collected in monthly installments.
FHA mortgage insurance costs can vary based on the loan amount in relation to the property value, the loan term, and the size of the down payment.
The FHA program allows qualified borrowers to make a down payment as low as 3.5% of the purchase price or appraised value.
Yes. FHA loans are a popular option for many home buyers in Washington and Oregon because they offer a low down payment and flexible qualification criteria.
Whether you’re buying a home or ready to refinance, our professionals can help.
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