Asked by Terrance Sasnett, Jacksonville, FL Fri Mar 6, 2009

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Christian Wi…, Other Pro, Jacksonville, FL
Tue Nov 10, 2009
Just to clear up Judy's answer, yes FHA/HUD insures the difference but usually on a default they will pay the whole and take the house which is why you see the FHA/HUD foreclosures for sale. Sometimes they will just pay the lender the difference, just depends on which way will leave them the least exposure.
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Sellin' With…, Agent, Jacksonville, FL
Fri Mar 6, 2009
Just to compliment the other Realtors. If you are buying FHA you will need PMI. Since Conventional loans need a minimum of 10% down you will pay PMI until the property appraises at 20% more than what you paid. Once you have 20% equity the PMI goes away. If you have the cash to put 20% down go ahead, because PMI can add quite a bit to your montly payment.
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Louise Warri…, , Lake Mary, FL
Fri Mar 6, 2009
Hi Terrance--Judy is exactly right. I'd just add one thing. The amount that the mortgage insurance will repay the bank/lender if there's a default of the loan is 20%. A common misconception is that the whole note was guaranteed by mortgage insurance. It's only the part of the loan that was above 80% of the value of the appraisal (technically, the part that was not "secured" by the downpayment and/or value of the property.

In the "old days" (2-3 years ago), homes generally rose in value year over year so lenders were fairly confident that if they only loaned you 80% of the value and you defaulted, the 20% of "excess value" (which as also insured with MIP) would be sufficient to pay any liens or costs to foreclose on the buyer. Unfortunately, with so many mortgages being upside down now (even the 80% is more than the house is worth) and lenders are having to eat huge amounts of debt when they foreclose or sell short.

You will be required to pay MIP or PMI (if it's a private mortgage and not government backed). Some of it will be up front (at closing) and then there will be a monthly amount added to your payment. I'd suggest you shop lenders to get the best rate and lowest closing costs. Make sure you get a "Good Faith Estimate" (GFE) so you can properly compare what everything is costing you to get the loan.

Best of luck to you. It's a great time to buy. Remember that while there have been similar hard times where housing values have declined in the short term, real estate is one thing that has continued to appreciate in value over time. Wish I could say the same thing for my stock portfolio.

Louise Warring
Coldwell Banker Residential Real Estate
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Judy Laufer, , Jacksonville, FL
Fri Mar 6, 2009
Hello Terrance.
MIP is a Contract insuring a mortgage lender against default risk. Mortgage insurance allows a borrower to purchase a home with a down payment as low as 3 to 5% of the purchase price-even less for qualified borrowers-instead of the usual 20% down payment lenders normally require. Insurance premiums are paid by the borrower. The Federal Housing Authority, an agency in the Department of Housing and Urban Development, insures mortgages on one-to-four-family houses and condominiums, and it reimburses the mortgage lender if default occurs. This will be required if you are putting less than 20% down on the purchase of the home.

With warm regards,

Judy Laufer
Home Buyer Magazine 2009, Five Star Realtor
Premier Property Certified
INI Realty Investments, Inc.
Cell: (904) 955-8588
Fax: (904) 880-5138
E-mail: judylaufer@comcast.net

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