Montana FHA Loans
It is not at all surprising when a consumer starts delving into the home-ownership business that confusion sets in and leads to getting lost in the labyrinth that is the mortgage and loan market. Thus, it is of utmost importance that a first-time home buyer in the state of Montana is armed with adequate knowledge on the different kinds of loan programs out there.
We like the FHA loan program as a truly buyer-friendly loan product for first-time home buyers and seasoned home buyers alike -- especially when compared to the more conventional home loans out there. Since recent years, FHA loan programs have grown more popular among first-timers and low-to-moderate income individuals and families because they are generally more accessible, in part due to considerably lower P.I.T.I.s (Principal, Interest, Taxes, and Insurance) fees and closing costs. The two most popular FHA loans offered in Montana are fixed rate mortgages and Adjustable Rate mortgages.
What are fixed-rate mortgages?
These are basically loan programs where interest rates remain constant throughout the life of the loan. A general advantage in fixed-rate mortgage programs is that homeowners can more readily foresee and budget for the total cost of the mortgage. Overall, the fixed rate loan is always the most secure and safest mortgage product to finance a home with.
What are adjustable-rate mortgages?
Because not all home buyers and homeowners have have the income necessary to buy the type of home they are wanting, conventional and FHA loan products offer them an ARM (adjustable-rate mortgage) option. Taking after its name, the fundamental difference between an ARM and a fixed-rate mortgage is the variability of the interest rates that come with the loan. ARM products have a lower start rate, which can allow a home buyer to qualify to finance a higher purchase price. Every ARM comes with an initial fixed rate period that can range from one year to ten years. When this fixed rate period ends, the annual interest rates then change -- it's called a "reset" -- and fluctuate, depending largely on the economy's workings. These types of ARM products are very risky and should be avoided whenever possible.
What are other advantages of FHA loans?
An FHA loan is generally more flexible and affordable than conventional home loans, with lower down payments and more forgiving credit guidelines. In addition to its flexibility in terms of underwritten FHA guidelines and lower P.I.T.I.s, Montana FHA loan programs help buyers save money by allowing home sellers to pay up to 6% of closing costs and pre-paids, along with the ability to streamline refinance an FHA loan without re-qualifying for the loan. A streamline refinance of an existing FHA loan allows homeowners to take advantage of lower interest rates and easily reduce their monthly mortgage payment.
Most FHA loans charge MIP (Mortgage Insurance Premiums) in the event of a foreclosure. These MIP payments are not that much different from conventional loans that charge monthly PMI (Private Mortgage Insurance). Plus, they help future home buyers to obtain lower cost loans through more traditional investor-based lending.
One of the lesser known, but more beneficial factors of having a home financed using an FHA home loan product, is the fact that HUD has built-in features that safeguard the rights of buyers and expand the opportunity of retaining your home during a financial crisis. The reality is, HUD wants you to stay in your home and make your payments. Ask one of our loan officers about the pre-foreclosure intervention programs offered by HUD -- just one more reason to consider an FHA loan!