Tony:

Here are all the BAD things I know about FHA:
1. The appraisers will look for all health and safety problems with the home (based on FHA guidelines) and report these in their appraisal. The loan will not fund unless these are fixed first.
2. The MI (mortgage insurance) basically stays in place throughout the life of the loan. There are exceptions, however, not in the first few years of the loan and you need to proactively pursue them once they become available to you. FHA will not do it for you.
3. I have never heard of an FHA loan closing in under 20 days.
4. You cannot finance a multi million dollar home with FHA due to loan amount limits.

All that being said, you need to look at the flip side:
1. Do you really want to buy a house with health and safety issues? Isn't it nice that the lender is requiring that the owner fix these items? And if you really want to buy a fixer upper, FHA can help you out here too. Unlike what Homa said below, FHA does offer a 203K loan which allows you to renovate, update and even do a total remodel on you home, using FHA funds at FHA interest rates.
2. MI protects the lender against default. Yes, it is an added cost to you, but don't you pay auto insurance on your car so the lender will be paid off if the car is totalled? Same idea. And even with MI added to the interest rate, we are still at 30 year lows (of course that varies from day to day and week to week, but we are still at historically low interest rates).
3. In today's lending climate, I have not heard of many loans that close in under 20 days. On the other hand I am hearing of loans that are approved and then for some crazy reason never close. So, the one good thing is, FHA loans ARE closing, while some other types of loans not (mainly due to both lender failures and underwriting guideline changes).
4. If you were looking to purchase a multi-million dollar home would we be having this conversation about FHA?

So, with FHA you get some really good bang for your buck, you close your loan and therefore can purchase your home, and you can do all this for 3% down. Oh, and if you really want to, you can find ways to do this for 0% down. What's bad about that? Dare to Dream.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty

Hi Tony,

If you are buying a fixer you probably can not get a FHA loan. They inspect the property and if there is a major problem they want the seller to fix it before they approve the loan. Is this bad enough!?

Sincerely,

Homa
Broker Associate
Prudential California Realty

Something bad about FHA's is that a lot of lenders are not yet qualified to do them. Make sure you are working with a reputable lender.

Thank you all for your answers.

The only bad thing I can think of is that the higher loan limits may go away at the end of December 2008.

Tony....

Nothing bad....it is the new 100% loan. You need to be aware they will impound your taxes, insurance and you will pay MMI (mortgage insurance) on the loan.

The only thing I can think of is it may take an extra week or so for approval. (Not really a bad thing!)

Tony,

There is really nothing bad about it! If you compare it to other programs out there it is very decent. Since the collapse of the sub-prine market FHA has really taken the place for credit challenged borrowers. If you are in this boat FHA is the way to go! I actually concentrate on FHA business at my bank because I believe it is a phenominal product. If I was a buyer looking to obtain 100% financing or the closest thing to it I would definately fo FHA. you can also google it to see what it is about. I personally cannot say enough good things about it. Rates are competitive as well.

Brent Bester
Mortgage Professional
614-622-8916