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A FHA-insured loan is what many people use to buy their homes. FHA-insured loans have been instrumental in bringing joy to families by making that unaffordable house into affordable home. Some business owners who occupy the mixed-use properties in which their businesses are housed also make use of FHA-insured loans for buying those properties. However, a FHA-insured loan is not free money and anyone who buys real estate or plans to buy real estate using a FHA-insured loan must understand the concept of FHA-insured loans very clearly. They must understand that FHA is not the lender, it only insures the loans
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FHA-insured loans (also known as mortgages) is money that you borrow from a financial institution, i.e. a mortgage lender, for the purpose of buying a property. The FHA-insured loan generally covers a part of your purchase price and the remaining portion has to be paid out-of-pocket for down payment and closing costs. The amount that you have to pay as down payment is dependent on a number of factors, including the FHA required minimum down payment which is currently 3.5%. Whatever you borrow from the mortgage lender as a FHA-insured loan needs to be paid back to the mortgage lender over a period of time (and of course, you will also need to pay appropriate interest on that FHA-insured loan).
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The tenure of your FHA-insured loan and the prevailing market rate will determine the amount of interest you pay on your FHA-insured loan. Generally, you are required to pay back the FHA-insured loan in the form of monthly installments which are composed of both interest and principal portions of the loan. Also, there are various types of these loans, e.g. fixed interest rate loans and adjustable interest rate loans. So depending on what type of FHA-insured loan you have opted for, your monthly payments might either remain constant (fixed rate) for the full tenure of the loan or may be adjusted periodically (adjustable rate) on the basis of a financial index.
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Besides that, some other costs associated with FHA-insured loan are closing costs, inspection costs and attorneys fees, among other costs and fees. Also, in case the property needs some repairs, there will be costs associated with that too (in which case you can opt for the FHA-insured 203k loan which will allow for the work to be completed per separate estimates and agreements). There is stamp tax and other taxes that you will need to pay, but understanding the concept of a FHA-insured loan and the related costs will make the home-buying process a lot smoother. And the process is really not that tough to understand if you invest a little time reading up on it.
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