The mortgage insurance programs of FHA, the private
mortgage insurers,and VA differ in terms of maximum
loan-to-value ratios and mortgage amounts, the financing of
closing costs, and the amount that each will pay lenders to
cover the losses associated with foreclosed loans, according
to the guidance prepared by the insurers for lenders.
While both FHA and VA can insure loans with effective
loan-to-value ratios that exceed 100 percent (due to the
financing of closing costs or other fees), the private
mortgage insurers do not offer insurance for loans with
loan-to-value ratios greater than 97 percent.
In addition, FHA insures loans only up to a maximum of
$363,000, while the private mortgage insurers and VA
permit insurance of larger loans. In connection with
settlement costs, FHA allows borrowers to finance most
closing costs, but private mortgage insurers and VA do not.
However, both FHA and VA allow borrowers to finance their
insurance premiums. Finally, while FHA protects lenders
against nearly 100 percent of the loss associated with a
foreclosed mortgage, the private mortgage insurers and VA
limit their coverage to a portion of the mortgage balance.
Private mortgage insurers generally cover only 20 to 35
percent and VA covers only 25 to 50 percent of the
mortgage balance, even if a loss exceeds that amount.
Although GAO found some variation in the qualifying ratios
of FHA, the private mortgage insurers, and VA, the guidance
provided by the insurers showed few other clear differences
in the underwriting standards for borrowers.
Each of the insurers permits the lenders to consider
compensating factors, such as a large down payment, when
a borrower does not meet the qualifying ratios. In addition,
although lenders must apply established credit standards,
each of the insurers relies on the individual judgment and
interpretation of the lenders in evaluating the credit history
of borrowers.
mortgage insurers,and VA differ in terms of maximum
loan-to-value ratios and mortgage amounts, the financing of
closing costs, and the amount that each will pay lenders to
cover the losses associated with foreclosed loans, according
to the guidance prepared by the insurers for lenders.
While both FHA and VA can insure loans with effective
loan-to-value ratios that exceed 100 percent (due to the
financing of closing costs or other fees), the private
mortgage insurers do not offer insurance for loans with
loan-to-value ratios greater than 97 percent.
In addition, FHA insures loans only up to a maximum of
$363,000, while the private mortgage insurers and VA
permit insurance of larger loans. In connection with
settlement costs, FHA allows borrowers to finance most
closing costs, but private mortgage insurers and VA do not.
However, both FHA and VA allow borrowers to finance their
insurance premiums. Finally, while FHA protects lenders
against nearly 100 percent of the loss associated with a
foreclosed mortgage, the private mortgage insurers and VA
limit their coverage to a portion of the mortgage balance.
Private mortgage insurers generally cover only 20 to 35
percent and VA covers only 25 to 50 percent of the
mortgage balance, even if a loss exceeds that amount.
Although GAO found some variation in the qualifying ratios
of FHA, the private mortgage insurers, and VA, the guidance
provided by the insurers showed few other clear differences
in the underwriting standards for borrowers.
Each of the insurers permits the lenders to consider
compensating factors, such as a large down payment, when
a borrower does not meet the qualifying ratios. In addition,
although lenders must apply established credit standards,
each of the insurers relies on the individual judgment and
interpretation of the lenders in evaluating the credit history
of borrowers.
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What is mortgage insurance for the FHA
program?
program?
| FHA Loan Programs |
