POST 1:
For those who are not eligible for conventional loans because of poor credit scores, there are options such as FHA and VA loans that homeowners with low credit scores may want to consider when purchasing their home.
A FHA loan (Federal Housing Administration) mortgages have flexible lending standards to benefit People whose house payments will be a big chunk of take-home pay, borrowers with low credit scores, provide homebuyers with smaller down payments and refinances with little equity.
This loan does not lend money but it insures mortgages by allowing borrowers to spend up to 57% of their income on monthly debt obligations, such as mortgage, credit cards, student loans and car loans. Whereas, conventional mortgage guidelines tend to cap debt-to-income ratios to only around 43%. FHA loans are sometimes the only option for borrowers with high debt-to-income ratios and low credit scores.
A VA loan are for most active-duty military and veterans who qualify for Veterans Affairs mortgages. Many reservists and National Guard members are eligible.Down payments are not required from qualified borrowers buying primary residences. The VA does not lend money, but guarantees loans made by private lenders.
Explain what is meant by an amortizing mortgage.
Amortization is the process of paying off a balance over time with regular, equal payments. This is most common with monthly payments on loans, but amortization is an accounting term that can apply to other types of balances. Amortized loans are designed to completely pay off the loan balance over a certain amount of time.
POST 2:
What are FHA's and VA's roles in the mortgage market?
The FHA and VA play a vital role in the mortgage market by providing loans to individuals that may otherwise not qualify for a mortgage. The FHA, or Federal Housing Administration was created in response to the great depression. The FHA established rigorous lending and borrowing practices (Allen 335). This helped increase the quality and quantity of loans across America resulting in millions of Americans finding the right mortgage for their circumstances.
Many FHA loans are backed by Private Mortgage Insurance which ensures the lender receives their money in the event of default by the borrower. The VA, or Veterans Administration, provides loans to military veterans.
Following WWII the VA helped returning war vets with assistance in securing mortgages. Ultimately, both the FHA and VA ensure Americans in lower-income brackets can own their own homes.
Explain what is meant by an amortizing mortgage.
An amortizing mortgage is a loan the requires equal periodic payments composed of both interest and principal. This is different than an interest-only loan that requires the borrower to make interest-only payments and then a final lump sum principal payment. Amortizing loans are usually better for both lender and borrower.
Lara is buying a new home with a mortgage loan for $245,000.00 at 4.5 percent annual interest with a term of 30 years. What is the amount of the monthly payment necessary to amortize this debt?
POST 3:
FHA was a governmental program that was established after the Great Depression and became a full-fledged federal agency in 1934 (Floyd & Allen, p. 335). Now it was essentially used to spur new confidence in the real estate market then, by enforcing new regulatory laws on the borrowing and lending processes.
Most importantly the FHA was established to protect the lenders. That being said our text refers to the FHA as an insurance policy for the mortgage and lending institutions to reduce the risks (Floyd & Allen, p. 335). Now with this loan type the borrower has to pay premium insurance payments (Floyd & Allen, p. 335).
What are VA's roles in the mortgage market?
This type of loan is another governmental backed loan. It was established after WW II (Floyd & Allen, p. 337). Firstly there is no required PMI payments that need to be made for this style of loan, but there are requirements that other loans do not have. One you have to have served or serving to qualify.
If you have served and are retired then you must have been retired under good standings with whatever branch you retire from. The biggest positive with using this loan is the fact that they do not require a down payment to secure the real estate with fairly good interest rates (Floyd & Allen, p. 337). This type of loan is referred to as a "guarantees payment if the borrower defaults" (Floyd & Allen, p. 337).
Explain what is meant by an amortizing mortgage.
Amortizing a loan is essentially taking the purchase amount times the interest rate, and then dividing it through the total number of months or the life of the loan.