Looking for a mortgage? You might want to consider an FHA loan. The New York Times says, “The Federal Housing Administration used to be known as a place for low-income borrowers with tarnished credit histories. But now, it has become a destination for borrowers whose credentials are respectable, but not stellar.” [NYT]

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  1. AskCars says:

    it’s pretty much the only way you can avoid putting 10-15% down these days.

  2. billbillbillbill says:

    We did FHA loan on our first house 18 months ago.

    The good- We were able to do an FHA streamline refinance last month and drop our interest rate 1.2% and save us $175 a month with no appraisal, and the only requirement being that we paid on time for 12 months and our payment would go down.
    The bad- If you don’t have 22% down, you have to pay FHA Mortgage Insurance for 5 years or when your Loan to Value is 78% whichever is longer.

    We are happy with it (especially after the streamline refinance!)

  3. oneandone says:

    There’s a very large, new, expensive apartment/condo building near my metro stop that now has a “FHA loans welcome!” banner stretched across the top. The banner is only a few weeks old; the apartments/condos were finished in September.

    I know they’re expensive because last time I was apartment hunting, their rent was easily twice as much as what I found for quite nice housing 3 blocks away from the metro. I understood the FHA loan banner to mean that they either priced themselves out of reality, or that no one is buying apartments in this area. Or both.

  4. HawkWolf says:

    A friend of mine, who makes considerably less money than I do (I think around 20k a year) got an FHA loan back in summer of 08 for a 70k house. I would really like to buy a house to get out of the apartment racket, but I can’t really come up with the required 20% down for… years. Am I a bad person for thus considering an FHA loan, or should I stick it out and save?

    • downwithmonstercable says:

      @HawkWolf: I think you only need 3% down…

      • FlyersFan says:

        @downwithmonstercable:

        You need 3.5% of your own money towards the down payment.
        You can get up to 6% of the sales price back as seller’s assist to help with your closing cost.

        I would recommend saving up as much as you can before you go forward with a purchase….have enough for your down payment, good faith deposit, inspections and at least half your closing cost (its tough to get someone to flip the entire bill for you and you dont have that much leverage in the negotiations).

        yes, I am a Realtor lol. FHA is becoming a lot more common because of its lower down payment and more relaxed inspections by the mortgage company.

    • TEW says:

      @HawkWolf:
      My advice would be to look into it. If you really have questions a C.F.P should be able to answer them. With regards to the mortgage, I would have a lawyer read it over so you can fully understand the terms of the loan.

  5. MinervaAutolycus says:

    We got an FHA loan for our condo 19 years ago. We got in for about 2.5 percent down. We did have to pay mortgage insurance, but it got us into the place. We were able to streamline the loan without appraisals a couple of times to lower the interest rate. Then we refinanced with a conventional loan and were able to drop the insurance.

  6. pb5000 says:

    I have an FHA mortgage and it’s been fine, sure I don’t like the MPI insurance but I also didn’t have 20% down either. I got a great intrest rate and really can’t complain.

  7. tommccabe says:

    I’m currently in the process of purchasing a house with my fiancee using an FHA loan. It is great for us as we make good money but have limited credit history and only have (about) 13% to put down. My advice, for anyone going this route in the near future, is to enter the process with a lot of patience. There is major scrutiny over the application and documents that we’ve submitted – as there should be, due to the whole mess we are in – but it is adding a lot of time to the process. After the mortgage company approved our loan, HUD/FHA still had to give their approval on the loan and they denied our application due to some of the paperwork we submitted (that the mortgage company accepted!). So we go new paperwork, resubmitted and are now waiting for approval again. Patience is key right now!

  8. Squeezer99 says:

    i bought my house with a state program for first time home borrowers and it is an FHA loan. and I wasn’t poor or anything. basically for what i was paying in apartment rent i could buy a house, so i did.

  9. LadyNo says:

    My husband and I have been pre-approved for an FHA loan and are currently looking for a house. One thing that’s nice about it is that some PMI companies are really tightening up and charging more than in the past. With an FHA loan the structure is different, you’re still paying mortgage insurance but it’s a fixed cost – half a percent of the loan amount.

    We actually just put in an offer on a house this week, and the listing agent was pleased that we’re FHA because it’s a strong loan product. There was a previous offer on the house that fell through b/c of the PMI.

    That said, there are restrictions. They don’t allow for peeling paint and other defects on the exterior, so you can’t necessarily buy a fixer-upper, for example. But it was the perfect product for us, since we can only put down 8-10% anyway, and our credit is hovering around 700. Not the worst, but not good enough for other loan products these days.