subject: When to Use an FHA Home Loan [print this page] When to Use an FHA Home Loan When to Use an FHA Home Loan
Are you hearing some negativity about using an FHA home loan for your first loan? Perhaps your loan officer is steering you toward a conventional loan instead. Well a conventional loan may be better for some. Here are some differences that may help you decide on which loan product is best for you.
A conventional mortgage may not require mortgage insurance. It is true you can save some money on your monthly payment by avoiding this, but the fact that FHA home loans have this insurance makes it possible for those who have bad credit, or no credit at all to qualify for a loan. So if that is your situation then you will want to look into an FHA loan product that fits your needs.
Another time when you should use an FHA home mortgage is dependant on the amount of money you have saved for a down payment. A conventional loan many times requires 10 to 20 percent down. If you don't have that much saved then it is best to consider an FHA home loan. They only require 3.5% down and will allow some creativity with the down payment. Like perhaps a family member wants to gift you the down payment, that is a possibility with this type of loan product.
Let's say you are young and do not have much of a credit history. A conventional mortgage may want you to take some time to establish a credit history. Although with an FHA home loan, you can be creative with your credit history. They will use things like how regular you are with your rent payments and utility payments to establish a credit history for you. So now you don't have to wait to buy that first home!
Perhaps you have had some problems and had to declare bankruptcy and now want to buy a home. Conventional mortgages require you to wait a longer period of time than a FHA home loan does. You can qualify in 2 years after the bankruptcy is discharged. If that is your situation, then the FHA loan products are a better choice for you.
What if you have been affected by a foreclosure? In today's mortgage crisis, many have experienced this problem. Once again the FHA loan can help sooner. You only need to wait 3 years before you can try to buy a home again.
Many don't like that the house has to measure up to an FHA home inspection to qualify. It is true their requirements might be stiffer, but they make sure the home is sound before they will insure it. So you can be sure you won't have to make some major repairs shortly after you close on the home. No surprises later!
It is true, not all will want to investigate the FHA home loan opportunity. But if you are a first time home buyer, you can see all the benefits far outweigh the extra hoops you may have to jump to close of one of these loan products.
