FHA Good or Bad
I’m surprised to hear on a regular basis how a prospective client explains that they have been pre-approved with a lender. And that they strongly pushed away from an FHA loan, for many they weren’t even offered an FHA loan.
FHA loans are designed to help more people buy a home because they require lower down payment and will accept lower credit scores vs. a standard conventional loan. FHA increases homeownership, especially for first time home buyers. Many first-time home buyers may not have much money to put down. Coming out of college potentially with student loan debt, doesn’t make it easy to sock away money to put down on a home.
Now, this is not the only reason to go FHA, it is also beneficial to help out those who are not first-time home buyers and have had financial distress in their past (bankruptcy, foreclosure, short sale, etc.). FHA allows for shorter waiting period than conventional when you are looking to purchase again. Again, helping to create homeownership for more people.
The main comment and concern I hear about with FHA are that the PMI is for the life of the loan. True, yes, but let me ask you a question “how many people do you know that have had their mortgage for the life of the loan, typically 30 years?” Exactly. The average homeowner will refinance and/or sell around 5-7 years from their original mortgage. Now, yes this is just an average but I yet to have met someone who has been in their same mortgage for 30 years.
The truth is that there are different loan options you just need to make sure you are being presented the right option for you. If you need to purchase a home sooner versus later but don’t have enough funds for a significant down payment, then you might want to consider and see what it would look like with an FHA loan.
In this business, I’ve seen it too many times where FHA gets dismissed and even lenders (your advocate) steering away from them. No, it may not be ideal for you but don’t you want to know that you had the choice rather than that choice being made for you? Wouldn’t you rather see the option and whether it saves you on your monthly mortgage payment or funds you need for closing?