FHA Drawbacks

FHA mortgages display two drawbacks. First, you'll pay FHA mortgage insurance premiums (MIP) to protect the lender should you fail to make your mortgage payments. This mortgage insurance initially will cost around 1.5 percent of the amount you borrow, such as $1,500 on a $100,000 mortgage. (Remember though, if you don't have the cash, you can add this premium onto your mortgage loan balance.) As another drawback, your loan interest rate will be boosted by one-half percent to cover additional mortgage insurance premiums that you'll make along with your monthly mortgage payments.

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