FHA Loan Advice: Buying and Keeping Your Home
For example, when you are in the budgeting and planning stages and have to decide how much cash to pay at closing time, it is tempting to save a bit on your out-of-pocket expenses and finance certain closing costs like the FHA loan upfront mortgage premium.
But financing such costs can add up, especially if you pay for discount points and other expenses.
The more you finance, the higher your monthly mortgage payments might be. While it’s understandable to increase the payments by a set amount when financing mortgage insurance, it is just as important to consider (ahead of time) how that increased payment will realistically affect your bottom line.
And it’s not just a matter of having enough room in your budget to pay the mortgage each month. It’s just as important to plan for your life's circumstances when the unexpected gets in the way.
When some borrowers encounter an unexpected expense, they may feel tempted to skip a mortgage payment “just this once.” But skipping a payment isn’t a great strategy. Why?
Consider what the government watchdog agency, the Consumer Financial Protection Bureau (CFPB) says about missing mortgage payments:
“It’s important to always pay your mortgage on time. Your payment is due on the 1st of every month. If your payment is late, your servicer may charge you a late fee and attempt to contact you. The good news is that you have until the 15th of the month to make your payment before a late fee is charged.”
Skipping that payment deadline can cost you more than you realize. Late fees and the potential damage to your credit are just the beginning.
Some can pay before the 15th. Ideally, if you miss the 1st of the month deadline, it is smart to pay as soon as possible and move on. But for those who do not pay by the middle of the month?
“A late fee can be charged for each month that you miss a payment. Additional fees can also be charged if you go into default (more than 30 days late).”
Any missed payment on your FHA mortgage means it is past due, and according to CFPB, when your mortgage goes beyond 30 days past due, it can be negatively reported to the credit bureaus.
“A single late or missed payment on your credit report can reduce your credit score.”
That won’t help some borrowers who decide to refinance or seek other forms of credit later on, so it’s best to consider your monthly budget long before committing to the mortgage.
To cut your upfront expenses, consider applying for a local down payment assistance program, paying for more items in cash on closing day, and even making a larger down payment than the required minimum.
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