A government-insured mortgage is what it sounds like: an insurance mortgage loan which is insured by the federal government. Government-insured mortgages can also be called government-backed loans, but the exact definition is the exact same. Basically, it means the mortgage is backed up by the government. In other words, the mortgage itself is government-insured, so there is not need for you to ever consider refinancing your existing mortgage. This is because when you refinance, you’re essentially starting over with a different mortgage.
Government-insured mortgages have many distinct advantages. For example, they are very convenient. They offer the convenience of one-stop shopping. All you have to do to get your home loan is fill out the online application. From there, the mortgage officer will take care of everything else.
Homeowners who own their own home or are currently looking for a home should definitely consider government-insured mortgages. There are a number of reasons why this type of loan might be right for you. One of the benefits is that these loans are available to qualified buyers, unlike most traditional loans. With a traditional home loan, you usually have to search through a variety of sub-prime lenders to find the right deal. You may also have to pay a significant amount of origination fees.
In addition, government-insured mortgages allow borrowers to borrow a larger amount of money. This is primarily due to the fact that borrowers receive a discount on the interest rate. This allows them to secure a larger amount of home loan debt without paying the high cost associated with obtaining conventional loans. Since conventional loans are based on market share, borrowers who do not wish to rely on limited lending from just one lender may end up paying an inflated amount on their monthly mortgage payment.
However, there are disadvantages to this type of mortgage insurance program. The first disadvantage is that, like all mortgage insurance programs, they are targeted at first time home buyers. This group of prospective buyers typically consists of first time home buyers. As a result, government-insured mortgages often have stricter requirements for borrowers. In some cases, borrowers may even have to repay the full face value of the home if they are unable to sell the house within the designated time period.
Another drawback is that most government-insured mortgages have significantly low interest rates compared to rates offered by commercial banks and other lending institutions. Even some of the prime mortgage programs offered by government agencies feature considerably higher interest rates. This can be quite detrimental for borrowers with poor credit ratings. In fact, borrowers who have a bad credit rating will not be able to qualify for many conventional loans.
One final disadvantage of these government-insured mortgages is that homeowners often do not get enough time to make an informed decision regarding whether or not to approve the loan application. For this reason, most FHA loans require borrowers to undergo a credit check process. If the borrower has less than perfect credit, he or she may find it difficult to obtain either a standard or FHA loan. On the other hand, if the borrower has great credit, he or she will be able to secure better mortgage rates and terms by working with a government mortgage lender.
Despite their drawbacks, federal government-insured mortgages provide great benefits to low and moderate priced residential properties. In order to qualify for one of these loans, borrowers do not necessarily need to have impeccable credit scores. They only need to be able to demonstrate an ability to repay a loan in a timely manner. By working with a qualified mortgage lender, these borrowers can take advantage of a great opportunity to take care of their financial obligations while boosting their credit score at the same time.