FHA Mortgages...the new (old) way to finance?

Hello and welcome. Today I think the necessary thing to discuss is FHA mortgages and why they are, once again, a strong consideration for a home buyer in the current market. I could write all morning and bore you to tears with the reasons to consider FHA but let's go over some positives and negatives of the programs offered. Currently, FHA requires only 3.5% down for a purchase and allows gift funds for that purpose. As far as I'm aware, no other lender in the industry is currently allowing gift funds or as little down. Rates are closely comparable to conventional terms and the monthly mortgage insurance payment is often less than half of what a conventional mortgage insurance would be. Another benefit is that the seller is allowed to give a 6% seller concession toward closing cost's, pre-paid's and escrows, double the amount that is allowed on conventional loans that require a minimum of 5% down. What this means to you is that you could need quite a bit less at closing if the purchase and sales is written up and offered with these things in mind. Lastly, FHA is willing to underwrite loans with much lower credit scores (as low as 580 in some cases) than conventional loan programs and will actually approve them. Ok guys, what's the catch? Well, keep in mind this is our opinion and others may dispute this but here are the negatives we think deserve your attention. One major consideration is that while the monthly mortgage insurance premium is much lower than conventional, FHA does require a one time up-front mortgage insurance premium. This can be pretty hefty considering it is 1.75% of the purchase price so quite simply, a $200,000 home would require a mortgage fee of $3500.00! While this is a significant number to say the least...it's important to know that FHA will allow that to be financed in to the mortgage without the borrower being penalized in anyway if doing so. It also does not affect your loan amount based on the 3.5% down. Still, something you need to be aware of. Another thing that would be considered a negative to some buyers is that you often are required to explain any past negative credit or recent inquiries on your credit report in writing. I think the majority of us would find that acceptable but in the recent past, many loan programs haven't required any explanation or even asked about these things. I suppose the final thing I would mention is that FHA does require a home inspection and water test if the well is private. My opinion is that you should do this regardless of the type of loan you get to buy a home. Some may not agree, again...we all see things differently. I've really only touched on some of the rules and regulations of the FHA mortgage, but...in this market it's something you and your realtor may want to behold...a good mortgage officer will make the transaction go off without a hitch! As always, contact me using the information above for more details or questions and enjoy the sun today, believe it or not, Spring is on it's way!!!