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Hi, I'm curious about the pros and cons of a FHA loan. I received a bunch of quotes and many of them were FHA - possibly this is because I want to leave my money in savings and not put as much down, and also my credit scores are only about 650. One broker (loan officer? I don't know her official title) said she doesn't do FHA loans - why not? Are they harder to qualify for? Does the broker not receive as much in fees?
FHA loans are the most competitive loans available with minimal down payment.
Requirements to become approved to originate, or originate and close, or originate, approve and close, all vary. It appears that lender cannot meet the minimum requirements to originate FHA loans. (usually asset requirements).
Some Mortgage companies are actually not registered with their state to do FHA loans. I worked at a company where they did not offer it and while I still was able to bring in business, I was missing that extra tool of FHA.
We have since been approved for FHA and I'd say over 70% of the loans I do for my clients are FHA based. One of the main reasons I use FHA for my clients is because if they are doing a re-finance on their home, they can pull out up to 95% of the homes value versus the standard 90% and even 85% in some cases with conventional financing.
The only con to FHA loans really is that you will have private mortgage insurance on the loan and have to pay an up front Mortgage Insurance Premium which in most cases is 1.5% of the total loan amount. Now, this fee can and most always is rolled into the financing so that you don't actually have to bring that to closing but that is basically the only con of FHA. I think that the pro's certainly outweigh the con's especially if you are in need of cash or a lower interest rate.
It's unfortunate that FHA is likely going to reduce cash out to 85% LTV soon.
and what's with the name? I was originally Timthemortgageguy, but the mods hammered me with name infractions and red marks. It was like I broke the law. Hence, the goofy Timtheguy moniker.
I don't think it's a bad idea, but it does stink as I've done my fair share of 95% cash out's with FHA.
Not sure why I haven't been asked to change it, I did read the guidelines but it just said to not make mention of an email address, company name, etc. If they do I don't mind though.
To the original poster, my rule concerning FHA is if your credit score is under 680 you should use FHA financing, but if credit scores are higher it is better to go conventional financing. The reason i use this rule is if your score is above a 680, conventional financing will get you the same rate as FHA but FHA is more expensive due to an upfront fee of 1.75% of the loan amount.
To the other mortgage guys, i feel you about FHA cutting the cashout but in Texas where i do loans, we have never been able to do a FHA cashout and conventional financing is limited to 80% of the appraised value.
To the original poster, my rule concerning FHA is if your credit score is under 680 you should use FHA financing, but if credit scores are higher it is better to go conventional financing. The reason i use this rule is if your score is above a 680, conventional financing will get you the same rate as FHA but FHA is more expensive due to an upfront fee of 1.75% of the loan amount.
To the other mortgage guys, i feel you about FHA cutting the cashout but in Texas where i do loans, we have never been able to do a FHA cashout and conventional financing is limited to 80% of the appraised value.
That might be true. But on the last GFE estimates I got (FHA/conventional) the FHA had lower monthly payments. Go figure. It was due to the pmi being so much less on the fha. Even with the 1.75 financed into the mortgage. I have 790+ and am thinking FHA because of the lower downpayment. I have the money for a higher downpayment. But I don't want to bury my savings into the house. I would rather have it liquid for emergencies.
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