December 7, 2022
What is mandatory and what is optional when you apply for an FHA home loan? You will find a lot of advice on the internet about buying a home. You can haggle over the home sale price, for example, and negotiate things like seller concessions.
But what about the not-so-obvious details? What is required and what is not? Mortgage insurance on your FHA mortgage, for example, is mandatory. To a point.
All FHA forward mortgages (also known as purchase loans) require you to pay for mortgage insurance on your FHA home loan each month.
That said, it may not be mandatory for the full duration of the mortgage. That may depend on how much you put down and the term of the loan you may have the option to cancel your FHA mortgage insurance after 11 years. Ask your FHA loan officer about what it takes to take advantage of this option.
And then there is another type of insurance to worry about–hazard insurance.
Hazard insurance may or may not be negotiable depending on where the home you want to buy is located. If it’s in a known natural disaster area, it may be mandatory.
And when reviewing your insurance coverage options, remember that if your insurance policy does not specifically mention a type of natural disaster by name? You may not be covered for it.
The FHA appraisal is mandatory, don’t overlook saving for this expense.
The home inspection is a voluntary expense, but if you purchase a house without having it inspected as a condition of your commitment, you are essentially buying a used car without ever having test-driven it.
The down payment on your FHA mortgage to buy or build a home is 100% non-negotiable. All borrowers are required to make a minimum investment in the FHA mortgage.
But you do not have to come up with the full amount of your down payment. An option is to apply to a local down payment assistance program (the FHA does not operate them) or seek help from friends and family.
Some borrowers believe the home loan interest rate they get offered may be non-negotiable, but the rate you may be offered when the time is right depends on your FICO scores and other credit qualifications.
Better FICO scores and credit history are often rewarded by more competitive offers from a lender.
The better your credit, the better chance you have of being offered a lower rate. If you don’t qualify, don’t give up on seeking a lower interest rate–consider paying for an interest rate buydown that could help.
Your lender will discuss the particulars with you–but be sure to ask.
You can negotiate rates and terms with a lender by using their competition against them Try calling five competing lenders and getting offers from them. Send the most advantageous quote you get to another lender and ask if they can do better.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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