Federal Housing Authority (FHA) Mortgage Insurance
Mortgage insurance is required on all FHA loans. The insurance is collected by the lender and paid to FHA which in turn reimburses lenders in the event of a loan default. MMI & MIP are the two different types of FHA mortgage insurance. Mutual Mortgage Insurance (MMI) is collected monthly on approved condominiums. Insurance is paid on the remaining balance of the loan only; therefore, the payment will decrease gradually over the life of the loan. Mortgage Insurance Premium (MIP) is a one time fee of 2.25% of the loan amount that applies to Single Family Residences (SFR) and Planned Unit Developments (PUD). This fee can be 100% financed and added to the base loan. SFR's and PUD's also pay monthly MMI.
FHA Appraisals
FHA uses the same appraisals for all programs. The appraisals (or Conditional Commitments) are done by FHA assigned/approved appraisers and set forth FHA's estimate of value. If the appraisal is at a value lower than requested by the seller, a reconsideration of value may be requested by sending to FHA recent comparable listings indicating a higher value, or the buyer may pay the additional difference.
Co-Signer
FHA allows a borrower to use a non-occupying co-signer for purposes of qualifying for the loan. The co-signers income, assets, liabilities, and credit history are included in the determination of creditworthiness. The co-signer must be a blood relative or, for unrelated individuals, documented evidence of a family-type, long standing substantial relationship not arising out of the loan transaction must be provided.
