What is FHA mortgage insurance? FHA mortgage insurance is a program that’s backed by the federal government wherein they insure the higher percentage portion of your mortgage to whatever lender happens to give you the loan. So the FHA insurance ensures that the lender will not suffer loss for monies that they lend and I believe it’s above 80 percent of the loan to value. So if you have $100,000 piece of property and that you got an FHA loan for $100,000, the FHA insurance would insure the first $20,000 of the loan. So if you went into default and you owed $90,000, FHA insurance would then pay the lender $10,000 of the outstanding debt if they foreclosed and had to take back the property or up to $10,000 of the loss of the lender.
Now FHA mortgage insurance is not for the benefit of the borrower. It’s for the benefit of the lender. That’s who it insures. The only benefit that the borrower has is they can borrow 97 to 100 percent of whatever the purchase price is or the appraised price of the property that they’re purchasing.
So if you have any questions about getting an FHA loan, well give me a call at 727-847-2288.