Is FHA good or bad?

I’m currently renting a house with 2 other units on the property. I’ve been interested in buying this place before I moved in, I’ve just made a deal with the landlord and I’m looking at mortgage options. So my big question is is the FHA worth getting or should I go with a traditional mortgage. Additionally I have very good credit ( very new to this )

2 Likes

@SaintAnderson FHA is fine if you don’t qualify for a traditional mortgage.

No real reason to use it if you do

1 Like

As someone who just bought in a competitive market, I was told am FHA will cost you your bid. I went with traditional to make my offer more competitive.

Depending on how much down payment you put down…you could have MIP for the entire life of the loan. There are also loan limits depending on where the home is located.

And FHA appraisals are more strict (the gov’t is lending you the money). Not really an issue for you but for the sellers to fix things. (think chipping paint, missing handrails, well/septic distances).

I would suggest having a lender give you both numbers and details. If you qualify for Conventional, I would suggest that.

@Alejandra The general consensus seems that I need to have a meeting with a person who can give me the rates on both a traditional and an FHA . Thank you for all your help !

@Alejandra It’s a great option for purchasing. Low down payment requirements plus your credit score typically won’t negatively impact your rate. Downside is upfront and monthly mortgage insurance premiums which are quite high. You could purchase fha and refinance in a year or two to remove mortgage insurance assuming your home appreciates in value.

Had a very good experience with an FHA loan when purchasing our first home. We did not have a lot to put down back then and we purchased a very affordable starter home. We refinanced out of it after a few years to a conventional loan and were also able to drop PMI.

Since it’s your first house, see if you qualify for any housing grants in your county to cover closing costs (there’s an income cap and limit on cost of house) but worth looking into if you qualify. I would figure how much your monthly payment would be with the pmi if it’s doable for you. The lowest amount for down payment is 3.5% but if you can afford to put more down I would

FHA was my first mortgage. Rates are the same everywhere and you just go through a bank you like working with. I had mine before they change the mortgage insurance (MIP) calculations. If I understand correctly, new FHA loans have MIP for the life of the loan, which isn’t in the interest rate but does show up in the APR comparisons. For my 2nd home I could have done a 20% down payment but opted for a conventional mortgage and PMI instead to keep my cash savings built up. I paid the have down over 2-3 years to eliminate the PMI. I was happy with both of these loans based on my circumstance. It’s really up to you and how they fit your circumstance. When I looked last week the FHA loans still had a rate under 4%, so that could make a big difference in a decision too

FHA appraisals always come in lower because of less reliance on market value so watch out for that.

@SaintAnderson Hello: If it was me I would check out all options on which mortgage lender would be best for me and my family and proceed from there. Just remember that all of the options out there have their pros and cons but don’t have any preconceived notions with regard to mortgage lenders until you check out every option available. Good luck