| eral Housing Administration, commonly called FHA, is a | | | | between the FHA and conventional mortgages, you'll |
| government division which does not make loans, rather | | | | see the advantages of FHA. |
| they are in the business of "insuring" your loan in case | | | | The FHA Down Payment is a minimum of 3.5% vs |
| of default. This is the reason so lots of lending | | | | 5% for conventional mortgages. |
| institutions like FHA so much. If you default on your | | | | As outlined earlier, mortgage insurance for a |
| loan, the FHA will buy that loan back from your bank. In | | | | conventional loan is more costlier than with FHA |
| the end, the bank's chances of loss are minimized | | | | mortgages. |
| greatly. | | | | The origination fee charged by mortgage brokers, |
| Questions come up about where does the FHA get its | | | | lenders, and loan officers is restricted to a maximum |
| money to purchase back borrower defaulted loans? | | | | of 1% while conventional loans are substantially more if |
| When homeowners close on an FHA loan, you pay | | | | they choose to charge more based on the interest |
| mortgage insurance. You pay paid at closing of the | | | | rate, credit score, etc. |
| amount borrowed x .0175, and monthly insurance of | | | | Credit qualifications for FHA is at 620 while |
| the amount borrowed x .0005. After it is all said and | | | | conventioanl mortgages nowadays are around 680. If |
| done on a home purchase of $150,000 at closing, you | | | | you have a bankruptcy or foreclosure, a borrower is |
| will need to come up with $2,625 ($150,000 x .0175). | | | | eligible to apply for a loan in four years (in some cases |
| Every single month, a borrower will be required to pay | | | | 5 years) for a conventional loan while with FHA it is |
| an additional $75 ($150,000 x .0005). When initially | | | | down to two and three years respectively. |
| glancing, it may seem to be a substantial amount of | | | | The debt to income ratios to qualify for an FHA loan |
| funds. However, did you know you are probably going | | | | are higher which helps more borrowers qualifythan a |
| to have mortgage insurance on a conventional loan | | | | conventional loan. On FHA loans, the seller can give |
| too. What's more is the rate will be much higher with a | | | | the buyer credits up to 6% of closing cost while |
| conventional mortgage. | | | | conventional loans are restricted to 3% closing cost |
| It wasn't so long ago that getting an FHA loan was a | | | | credit. |
| major pain! The reason for this was due to more | | | | The only glaring difference for buyers in high costs |
| inspections, extra fees, the time process to them was | | | | areas is the FHA has a maximum loan limit. So if you |
| lengthier, more documentation was required, it became | | | | intend to buy a home in an area which has sales |
| difficult to qualify for, rules for appraisals were not | | | | prices significantly more than the current FHA loan limit, |
| favorable, and more items. Nowadays, getting an FHA | | | | you will need to come up with more funds down. |
| loan has been simplified and the extra fees are | | | | Now after reviewing the comparisons above which |
| restricted. | | | | loan is more attractive to you? |
| If you realistically do a side by side comparison | | | | |