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Here are a few questions that are asked quite often. If you find yourself having the same questions, pleas take a moment to review the information below. As always, if you have any questions, you can always call me direct. Kevin Green (720) 982-9918

How Much Home Can You Afford?

Among the most common questions from a home buyer is “How much home can I afford?” The answer, however, like many things, is that “it depends”.

There are no concrete rules for how much home you can afford, or how big your mortgage should be. This is because the way that a mortgage lender calculates your maximum purchase price will be different from how you would calculate it yourself.

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How Does Refinancing Work?

In the world of mortgages, the term “financing” refers to borrowing money from a bank to help pay for a property.

If then, at a later date, the homeowner wishes to replace his mortgage with a new one — one with either a lower mortgage rate, for example, or one that provides cash-out at closing — the financing process is repeated.

This repeat is called a “refinance”. Refinancing is when you obtain a new mortgage loan to pay off and replace an existing one.

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FHA Mortgages

During the real estate boom, home loans backed by the Federal Housing Administration, or FHA, made up only a minority of loans. Higher home prices and the popularity of interest-only and no-down payment loans made FHA loans almost nonexistent.

“In many areas, real estate prices had skyrocketed above the loan limits set by FHA per county,” says John Councilman, federal housing chairman for the National Association of Mortgage Brokers, or NAMB, and president of Maryland-based AMC Mortgage Corp.

Now, the FHA is underwriting loans at quadruple the rate of three years ago, according to The New York Times. In fact, half of the FHA’s current portfolio originated in 2009, and FHA loans comprise almost 50 percent of the entire home-loan market, says FHA Commissioner David H. Stevens.

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Removing FHA MIP

As compared to conforming loans and jumbo mortgages, Federal Housing Administration (FHA)-backed loans are popular for several reasons.

  1. FHA allows a 3.5% downpayment
  2. FHA allows refinances without appraisal
  3. FHA mortgage rates are usually really low

Relative, though, one place where FHA mortgages can fall short is with respect to mortgage insurance.

As compared to loan types including conventional, USDA and military loans, FHA mortgage insurance premiums (MIP) are sometimes cumbersome and costly.

If you’re going to use an FHA-backed mortgage for your upcoming purchase or refinance, you’ll want to know how FHA MIP works.

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