FHA Loans Offer a Great Mortgage Rate and Other Benefits

February 15th, 2010

An FHA Energy Efficient Mortgage helps pay for improvements while FHA-insured loans protect you from prepayment penalties.

Using your mortgage loan comparison calculator might confirm that a mortgage insured by the Federal Housing Authority would give you the best deal. FHA-insured mortgages also have benefits beyond the best mortgage rates.

Mortgage Calculation Could Include Energy Savings

Besides the FHA-insured mortgage, you might qualify for an FHA Energy Efficient Mortgage (EEM) to fund improvements in the home’s energy efficiency. These improvements not only reduce your utility costs; they add to your equity in the home.

To obtain one of these federally-backed mortgages, which are available in all states, you need to have a professional rater complete a Home Energy Rating Systems report. The report requires a complete inspection of the property’s energy efficiency, from the windows to the appliances and insulation.

After the inspector determines the home’s current energy efficiency, he or she recommends improvements to the property. The recommendations include estimates of the upgrade costs, of the reduction in energy costs once the upgrades are installed, and of the life of the upgrades before they will require replacement.

You may obtain an EEM for $4,000 or five percent of the property value to a maximum amount of $8,000. You also may exceed the FHA loan limit by the amount of this mortgage. To make the FHA EEM even more attractive, it does not require an increase to your down payment.

A great home loan rate with less fine print

With an FHA-insured mortgage, you have less to worry about when reading the fine print. Other loans may impose a prepayment penalty. FHA loans, however, do not. If you have been using a mortgage prequalification calculator and find that you can move to a better home, you may pay off the FHA mortgage early without incurring a penalty.

If you prepay an FHA loan and you do not make your final payment on the regular payment date (the first of the month), the lender may require that you pay interest until the end of that month. FHA rules allow this, although it is within the lender’s discretion.

In most cases, an FHA-insured loan does not include a due-on-sale clause, either. This clause in some mortgage contracts requires you to pay off the loan in full if you sell your home. With an FHA loan, you may sign the loan over to the new buyers if they qualify.

When attractive mortgage rates are scarce, an FHA-insured loan offers a fair deal for home buyers.

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