What are the pros and cons of a FHA loan?
- Relaxed Credit Requirements. Unlike most mortgages, FHA realizes that you may have made some credit mistakes in the past.
- Low Down Payments.
- Small Reserve Funds.
- Increased Allowance for Closing Cost Financing.
- Larger Income to Debt Ratios.
- Mortgage Insurance.
- Minimum Property Standards.
Likewise, people ask, what is the downside of an FHA loan?
Downsides of FHA loans Not only do you have to fork over an upfront MIP payment of 1.75% of your loan amount, but you must also pay an annual premium that works out to around . 85% of your loan. Worse, FHA borrowers typically pay these premiums for the entire life of their mortgage — even if it lasts 30 years.
One may also ask, what is the catch with an FHA loan? The Catches. Mortgage insurance protects the lender if you can't pay your mortgage down the road. If your down payment is less than 20%, you generally have to pay this insurance no matter what kind of loan you get. However, the amount you save in interest by getting an FHA loan could offset that amount.
Secondly, is it a good idea to get a FHA loan?
There is one simple reason FHA mortgage loans are attractive to many buyers; it is easier to get approved for an FHA loan. You can get approved for an FHA loan as long as you have: “Decent” credit; with a score at least in the 600s. Three and a half percent for a down payment.
Why do sellers not like FHA loans?
Reasons Sellers Don't Like FHA Loans Both reasons have to do with the strict guidelines imposed because FHA loans are government-insured loans. For one, if the home is appraised for less than the agreed-upon price, the seller must reduce the selling price to match the appraised price, or the deal will fall through.