IF the FHA is guarantor of mortgages to lendors, isn't paying mortgage insurance double dipping?
Answers:
FHA provides mortgage insurance on indubitable loans at excellent rates. It is a guaranter of the mortgages because of the insurance.
There are also loans not guaranteed/insured by the FHA. Many require Private Mortgage Insurance (PMI) which is much more expensive than an FHA loan.
THere are also some elected representatives loans which do not require any FHA guarantees or PMI - such as VA loans where on earth at hand is no such insurance, simply a guarantee from the VEteran's Administration
FHA borrowers money the premiums to the FHA to insure their mortgages in exchange for competitive interest rates, no credit chalk up financing and low down payments. They bring a credit on the premiums once the loan is rewarded bad. There is no double-dipping.
Mortgage insurance is similar to property insurance, robustness insurance or any other thoughtful of insurance. The principle is that you compensate a payment or premium to the company and the company within turn provides a guarantee of coverage.
The mortgage insurance that you repay on an FHA loan is your wage surrounded by exchange for a promise from FHA to the lender that if you evasion on your loan (stop making your stipend and carry foreclosed on) that the lender will not lose the money they loaned you. Foreclosures are a losing proposition for a mortgage company, they lose money, not trademark money if they hold to thieve your house from you. If you want proof a moment ago look at the financial report and see how tons mortgage companies own declared ruin surrounded by the finishing 6 months. These are the companies that loaned money to ethnic group who later default on their loans.
The guarantee provided by the FHA mortgage insurance allows the lender to treat your loan as a lower risk proposition afterwards if you applied for a mortgage in need insurance.
In the mortgage industry greater risk lead to high interest rate. The lender requests a high return on their investment (the interest they charge) in exchange for taking a high risk by loaning you the money.
Example: Your local wall may charge you 5% interest on a personal loan as defiant a loan shark who might charge you 100% interest on a personal loan. If you enjoy devout plenty credit to borrow from your sandbank you don't step to your local loan shark. Crude, but a honest example.
The function of FHA mortgage insurance is to allow mortgage lenders the knack to loan money to relatives who are highly developed risk (read, not A plus credit ratings) minus charging them better interest rates. Without the mortgage insurance you would reimburse much sophisticated rates.
Not sure where on earth the conception of double dipping comes into your request for information, but the information above explains the principle losing the mortgage insurance.
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