Having an FHA insured mortgage?
Ive had this house 2 years,never missed a payment. Now due to health reasons,I must leave to go to a care-giver.The mortgage is FHA insured. If I discontinue payments,am I correct in understanding that the Lender will be paid by FHA?If so,are there repercussions to me?I am now disabled and receive SSD.I have the house on the market for the second time,no offers.Its now listed as a short sale,still no offers.Can anyone clarify this please?I assume its similar to car insurance,if i have an accident,the insurer pays and there are no other consequences to me.Is it the same with an FHA insured Mortgage?
- loanmasteroneLv 78 years agoBest Answer
A FHA insured mortgage loan really has nothing to do with you. FHA insured the mortgage loan with the bank. In the event you would not be able to pay the monthly mortgage payment FHA would repay the bank any funds not paid by you.
In this manner the bank that you borrowed the money to purchase the house would not be on the hook for the house, thus the house would not be a liability to the bank.
FHA would take possession of the house, thus the house would be a liability to FHA.
You would still be liable for the mortgage payment, as the lender or FHA would foreclose on the property. A foreclosure would become a negative on your credit report for several years.
This is not insurance for you and would not relieve you of your financial responsibilities to pay the monthly mortgage loan payments.
You have hazard (Fire) insurance to cover any catastrophe, that would pay you to replace your house in the or make it hold once again in the event of fire, accidentally being destroyed by unforeseen happenings.
I hope this has been of some benefit to you, good luck.
- Steve DLv 78 years ago
In addition to answer number 1, you also (note also since there are exemptions) might get hit with a tax bill - should the bank write off the unpaid portion of the loan, you will get a 1099 which, under certain conditions, you would report on your tax return as income. Since you would not have paid a withholding on this money, you would probably end up with a smaller tax refund or even owe money to the IRS.