Should I do a FHA Loan for My Mortgage?

An FHA Loan could be the answer you are looking for.

FHA loans are insured by the Federal Housing Administration (FHA).  There are some certain rules and benefits that come with FHA loans.

Here are the details you will need to know about an FHA loan.

Benefits of an FHA Loan:

  • Low Down Payment – FHA only requires 3.5% down payment on purchases.  Compare this with 5% on conventional loans. (5% if you are lucky, most likely the down payment will be no less than 10%.)
  • Lower Closing Cost Fees – This is one of the rules for the broker. There are certain fees that cannot be charged into an FHA loan which makes your closing costs less expensive.  Now most brokers and banks will try to make this up somewhere else so they do not have to pay those fees.  This is okay because those fees need to be paid, but you can ask them where they are making up the money for the fees that cannot be covered.  It will either be more points on the front or in the YSP (What is YSP?)
  • Lighter Credit Requirements – This means your credit score can be lower and still qualify for a FHA loan.

Cons of an FHA Loan:

  • Up Front Mortgage Insurance – FHA loans charge an upfront mortgage insurance fee of 1.5%.  You will have to pay this on the front of your loan making it more expensive than a conforming loan.  The fees cost less but mortgage insurance ads more.
  • PMI – Most people that opt for an FHA loan do so because of the 3.5% down payment.  This means you will have to pay a monthly mortgage insurance.  For mortgages with terms 15 years and less and with Loan to Value ratios 90 percent and greater, annual premiums will be canceled when the Loan to Value ratio reaches 78 percent regardless of the amount of time the mortgagor has paid the premiums.

If you are in the market for a mortgage be sure to ask your broker about an FHA loan. An FHA Loan could be the answer you are looking for.

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