Mortgages...Should I Get An FHA Loan?

Mortgages…Should I Get An FHA Loan?

Mortgages can be confusing until you do your research and check into the info you are being given from others. Make sure to use a loan officer that you trust. They should advise you on the best type of loan. My first home loan was a FHA loan and I had no idea what it was even after I signed. I decided from then on I would know the true costs of a loan before I signed on the dotted line.

What Is An FHA Loan? – Mortgages

I found out that a FHA loan is a loan backed by the Federal Housing Administration on my behalf. I qualified for this loan because it has less stringent requirements than a traditional loan. This enables first time home buyers, like myself, or those that can’t meet the requirements of a conventional mortgage, to purchase a home. There are pros and cons to a FHA Loan and today we will cover some benefits and drawbacks of financing your house this way.

Some Of The Benefits Of An FHA Loan – Mortgages

A reduced down payment of 3.5% or 10% based on your credit score: Conventional mortgages often require a 20% down payment. If you don’t have that much cash upfront, this could be a good option for you.
Foreclosure assistance: If you find yourself missing payments and heading down a road to foreclosure, the FHA offers assistance if you qualify.
Low qualification for credit score: You can qualify for this loan with a credit score as low as 580.

Some Of The Drawbacks Of An FHA Loan – Mortgages

Upfront and annual MIP: I hate MIP! This is mortgage protection insurance and it is required and built in to your monthly payment. In addition to your ongoing monthly cost, FHA loans also require a second MIP upfront. This is the biggest contributor to a FHA loan costing you more.
Less money up front, means more money in interest: First of all, this one is a matter of opinion. But, when you have the least amount of money possible upfront than you are going to be paying more in interest for the life of your loan. That is something to truly consider because it can cost you a lot over the life of your loan.