The FHA Home Loan is an Affordable Loan Facility for Low Income Earners

Key to the New HouseThe single biggest purchase of any person or family is usually their home. This is a long-term investment where the homeowner pays the mortgage monthly for up to 30 years. The home is not just big, but in monetary terms as well.

According to experts at PRMI St. George, one of the easiest loans to apply for is the FHA Home Loan. This facility provides a simple and affordable mortgage with flexible terms. This is usually recommended for those with a low credit score, and the conditions of the loan reflect that.

Requirements

The FHA Home Loan is meant to be an easy way for people to buy their first home. The borrower can avail of the loan if he has a credit score of 500 or higher. Downpayment is 3.5% for those with a credit score of 580 and above, while those who have credit scores between 500 and 579 require a downpayment of 10%.

Loan term is either 15 or 30 years. The mortgage insurance has an upfront premium of 1.75% of the loan amount and an annual premium between 0.45% and 1.05% of the loan amount. The annual premium is paid in monthly installments as part of the mortgage payment. The loan has a fixed interest rate.

Purpose

The FHA Home Loan is not funded by the FHA. Instead, it is lent by a lending institution and insured with the FHA. Part of the mortgage payments is loan insurance premiums. If the borrower defaults on the loan, the FHA will cover the payments.

The terms of the loan allow lower to moderate income earners, and those with a low credit score to be able to buy a principal residence. Repeat buyers can avail of FHA loans, as long as these are used to buy a principal residence.

The FHA Home Loan was first established during the Great Depression in the 1930s, to help low-income earners buy their own home. The terms of the loan make it very accessible for low to moderate income earners to avail.

Mortgage Evaluation: What Questions to Ask

Couple reading a document

Couple reading a documentIf you’re like most buyers, you will probably have to borrow money to purchase a home. There are a number of financing alternatives, with mortgages as the common choice. Home loans come are available in different lengths, interest types, and terms.

When shopping for a mortgage, it is deal to check with different sources or lenders. This is because loan availability, down payment requirements, interest rates, and closing costs will vary. It is also important to work with a reliable lender.

What to Check

Primary Residential Mortgage, Inc. and other mortgage companies in Oregon noted that you should watch out for those who use high-pressure sales tactics to encourage you in getting a loan more than what you can afford. You can better evaluate a mortgage by asking the following questions:

  • How much is the required down payment?
  • What are my interest rates going to be? Can they change?
  • How much will my monthly loan payment be?
  • What are terms of the loan?
  • What are the hidden costs?
  • Is there a prepayment penalty?

Comparing Loans

If you’re considering an adjustable-rate loan, you can compare loans better with these questions:

  • What is the cap or the maximum interest rate increase over the life of the mortgage?
  • How do adjustments work? What can happen to my payments?
  • What are the risks? What can I do to prepare for them?
  • Can my loan balance increase?
  • What are the good points? Do they outweigh the risks?

You can use a mortgage calculator to know the estimates of your monthly mortgage payment as well as the amount of house you can afford. It is better, however, to work with a reliable to lender learn more about your options. Getting a pre-approval is also ideal, so you’ll have an edge over other buyers when house hunting or buying.

Every buyer is different, so it’s important to find one that suits you best. Research about different loans, costs, and processes involved to make an informed decision. Note that a bad loan can cost you thousands of the money in the long run.

A Beginner’s Guide to Investments

Investment

InvestmentSo, what is Investing?

American business magnate Warren Buffet calls investing “the process of laying out money now to receive more money in the future.”

Investing, therefore, is the act of putting money into something today and using that thing to generate profit tomorrow, or further down the line. With that definition in mind, an investment can basically be anything you’ve spent money on, but also rely on to earn money. This could be a car you use for deliveries, or work boots for the factory.

In this article, investments, such as company shares and unlisted investments, will be discussed. For the first-time investor, these might all seem a little intimidating. However, with a little math, insight and a bit of luck, investing can be a viable source of long-term profit.

Do I Really Need It?

Investing your money is a great way to “diversify your revenue stream”, which is simply multiplying the ways you earn income. The right investment can double, or even triple your initial capital.

Investments are a patient man’s game. While it is possible to make quick money through trading, there are wiser applications of investments, such as real estate, or corporate bonds. Those options may take time before they generate revenue, but the payoffs are bigger and more secure and are less stressful to manage.

Figure Out What Sort of Investment You Want

Listing down all the possible types of investments would take a considerable amount of time, so let’s focus on the most common ones.

The Australian Securities & Investments Commission, or the ASIC, lists the three most common investments in Australia. These are shares, unlisted investments and managed funds.

Shares are the most common type of investment, and are probably the ones that sound most familiar to casual observers of finance. Investing in shares means that you are buying a part of a company, and your profit (or “returns”) comes from any capital growth or dividends if your share increases in value over time. To simplify further: if the company you invested in makes money, then your share becomes more valuable. Once this happens, you can sell your share for a higher price than when you initially bought it, thus making profit.

An unlisted investment, or debenture, is when an investor loans money to a company or organisation, and in return, that company or organisation pays off the loan with a fixed rate of interest. This loan is repaid within a set amount of time. Usually, debenture investments are used by companies or entities as a loan to other borrowers, usually people looking for mortgage financing or debt capital funding.

This makes it riskier than investing in shares, which is why the ASIC heavily regulates debentures and other unlisted investments.

Managed funds, or managed investment schemes, are created when your capital is pooled together with other investors’ money and used to buy shares, or some other kind of investment. Investors then earn based on how much their initial capital was, gaining returns relative to the percentage of the pool that they own.

Because managed investment schemes usually have multiple investors, it’s heavily regulated and controlled by a constitution, and is managed on a day-to-day basis by a professional investment manager.

Other investment options exist, from indices and warrants, to real estate. Do your research on the type of investment you want, and consult with a professional.

Generally, investments are things that generate revenue in the long-term. While there are low-risk investment options available that earn you a decent profit quickly, other options such as managed funds have higher risks with bigger profit. The latter is more often the investment of choice for people who are willing to wait for their initial capital to grow.

Diversify!

It’s generally never a good idea to put all your eggs in one basket, and this is especially true for investing. Having multiple investments in place means that, if one investment fails, you’ll still have other sources of profit.

One example would be to buy shares of a company, and then using the profit from those to purchase real estate. Your real estate property then generates money, either in the form of rent or the proceeds from a sale, which you can then use as a contribution to a managed fund, the profit of which you can use to buy stocks, or more company shares. Thus, an investment cycle is created.

The concept of investing is simple. However, there are a lot of intricate investment types, processes and laws that govern investing. Beforehand, always do your research, and consult professionals.