Top 10 Reasons to Get an FHA Loan

Posted by wreda on August 28th, 2009

mortgage

If you went to get a mortgage four years ago, you would have been bombarded with options. Do you want zero down? An 80/20? Perhaps a Low Doc, or No Doc, or negative amortization loan? Whatever your fancy, it was there.

Today times have changed and your options are limited. There are three basic loan programs left: Conventional, FHA, and VA. The VA loan is great, but you must be a veteran in order to get one. So, if you don’t fit that bill, then you’re left with only two choices. How do you know what is best? Which provides you, the borrower, with the most security and affordability? And which will still lend to you in today’s climate? The answer is easy; look no further than the Federal Government!

The FHA has been lending money since 1934, and is still the largest insurer of government mortgages in the world, making it your number one source of financing for a home loan.  Here are my top 10 reasons why:

10. FHA loans have more competitive interest rates than the competition.

9. Your debt-to-income (DTI) ratios are more flexible on an FHA loan.  Conventionally, you are required to keep your housing expense at or near 28%, however, the FHA will allow 31%. Your total expense ratio (your housing expense and all other debts) on a conventional loan must be around 36%, whereas FHA will allow 43%.

8. There is no financial reserve requirement on FHA loans.

7. You can make a 3.5% down payment in comparison to 5% or 10% down, depending on the market, with conventional loans.

6. Your entire down payment can come as a gift from a relative, employer, or even an organization.  Conventional loans require that your minimum down payment comes from your own funds and is sourced for 2 months.

5. There are greater protection requirements against foreclosures, and lower penalties and late fees, should you be late on your payment.

4. FHA is federally insured and allows for an assumption of your mortgage by an interested party.

3. FHA consists of a variety of programs offering both fixed and adjustable rate mortgages.  The ARMS available from the FHA offer more security for the borrower and less fluctuation in rates during the adjustment periods. An ARM can also be rolled into a fixed rate mortgage without having to re-qualify or have a new appraisal.

2. A non-occupant co-borrower is allowed to cosign on the loan to help buyers who may not qualify on their own. No other loan program today allows this option.

1. The streamline refinance option. When you get an FHA mortgage, you automatically receive an entitlement for a streamline refinance, which allows you to refinance without having to re-qualify or even have an appraisal completed.  This is especially beneficial in times like these, where appraised values are low and you may not have the required equity to refinance.  More consumers today are able to take advantage of current low rates because they originally took out an FHA mortgage.