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John, Home Buyer in 10305

FHA loan, pros and cons. Someone help in short paragraph, please.

Asked by John, 10305 Tue Feb 17, 2009

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Pros: MUCH easier approval process, lower down payment, cheaper Mortgage Insurance, less restrictive debt-to-income ratios (this is a BIG one because conventional financing - especially with MI - is usually limited to 45%; FHA will go to 55%), put as little down as you want, little or no interest rate adjustments for credit scores above 600, AND MANY MORE

Cons: Lower loan limits in most areas nationwide, Up Front Mortgage Insurance which can be good or bad, Longer approval process (banks are taking a lot more FHA applications right now), Owner-Occupied only.

Luke Allison
Flagstar Bank
828-777-8828
Luke.Allison@flagstar.com

Apply Online: flagstarloans.com/lallison
1 vote Thank Flag Link Tue Feb 17, 2009
Pro's: Low down payment, approval guidelines and interest rates are not credit score driven, flexible debt-to-income ratio guidelines,allows gifted funds for down payment and closing costs, allows the seller to contribute up to 6% of purchase price towards your closing costs,permits a co-signer

Cons: FHA has minimum property standards which must be met (meaning it's tough to finance a fixer upper), has stricter guidelines for condo financing, home must be primary residence (no rentals allowed), mandatory mortgage insurance (PMI) regardless of down payment, HUD charges a 1.5% up front funding fee (called MIP) on all loans, sometimes take longer to approve, some sellers don't want to deal with buyers with FHA fincancing

Bottom line is if you are looking for a mortgage with a low down payment or if your credit is not perfect then FHA is probably your best option. If you have a large down payment and stellar credit then you're probably best off shooting for a conforming loan. Even though the list of cons may be a little longer, the value of the pros far outweigh the cons for most borrowers.
1 vote Thank Flag Link Tue Feb 17, 2009
FHA loans provide for a lower down payment, and in most cases, are easier to qualify for. In this difficult financing era, this is a valuable option for a mortgage for many people. The only downside I can think of right now is that there are loan limits, which will restrict buyers to borrow for some of the higher priced homes.
1 vote Thank Flag Link Tue Feb 17, 2009
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