Final answer:
The seller and third-party contributions to an FHA-insured mortgage are limited to 3% or 6% depending on the buyer's down payment percentage. Escrow accounts contribute to the convenience of paying property taxes and insurance as part of the monthly payment. The FHA's historical context also highlights past challenges with discriminatory practices like redlining.
Step-by-step explanation:
The amount that the seller and/or third-party can contribute to an FHA-insured mortgage is tied to the down payment percentage and varies accordingly. For buyers who make a minimum down payment of less than 10%, the seller and third-party contributions are capped at 3% of the home's purchase price. Conversely, if the down payment is 10% or higher, the seller and third-party can contribute up to 6% towards closing costs, the buyer's prepaids, and possibly discount points.
The concept of escrow is important when considering the overall monthly payment, as it includes not only the mortgage but also property taxes and home insurance handled by the escrow account.
It's significant to note that FHA loans, while offering lower down payments and are more accessible to a wider range of buyers, still require mortgage insurance. This is an additional cost to the borrower to protect the lender in case of default. Moreover, while FHA loans can be beneficial, they have historically been entangled with issues like redlining and housing segregation, limiting the positive impact for minority homebuyers.