The loan we love today is spelled – F. H. A.
by Evan Vanderwey on 03/06/10 at 2:18 pm
One of our favorite movies is “Dan in Real Life” The theme song in that movie is great its: “Let my Love Open the Door”
Today’s post is all about giving FHA the love it deserves.
So. . . let my LOAN open the door . . .
Despite the rise in FHA’s up front insurance cost to 2.25% of the loan amount – FHA loans continue to gain market share as the most popular loan for home buyers – and not just first timers either.
The two big drawbacks of FHA loans are the monthly mortgage insurance (most FHA loans but not all) as well as the up front mortgage insurance premiums.
That means you will “owe” more than your sale price minus your down payment because of the Up Front Mortgage Insurance Premium which is not charged on Fannie Mae and Freddie Mac insured mortgages. You will also pay around $45 per month for every $100,000 you borrow.
Fewer and fewer home buyers are deterred by these in today’s market. There are at least 10 reasons for this:
1. First time buyers who have not been able to save a full 10 or 20 percent down payment are able to get in for just 3.5% down.
2. Move up buyers who sold their home for less net cash to them are still able to be buyers and buy a home from this market because of the low down payment.
3. The monthly FHA mortgage insurance can be dropped in as soon as 5 years.
4. On 15 year FHA fixed term loans with 10% down – there is NO monthly Mortgage Insurance.
5. 6% seller concessions allow for total money invested to be 3.5% of the sale price in most cases.
6. No interest rate add ons for 640 or above credit scores.
7. FHA Interest rates are as good if not better than conventional loan rates – with no points as of this writing they are at or better than 5%.
8. Underwriting is easier than with a conventional PMI loan and believe it or not, the appraisal process is faster and gives fewer hassles.
9. You can buy a home almost anywhere and at any income level. Even though in most markets the maximum loan amount is just over $270,000 – this is not prohibitive for most (95%?) qualified home buyers.
10. Even refinancing is easier. Those in a non-traditional (not Fannie/Freddie) ARM loan can refinance easier with the need for a lesser appraised value.
It’s not surprising that FHA loans are the loan of choice for many.
If you do have 20% down and your credit score exceeds 720, then there is no question that you should use a conventional loan and avoid the negatives with FHA. But for many who don’t – FHA opens the door.
So if I haven’t said it enough times in the last 30 days, I’ll just keep saying it. Now is a great time to buy your first home or trade up.
Let my FHA loan open the door – check it out today!
