When we go online, we’re hit with a flood of editorial content every minute of every day. We’re constantly barraged with information from sources both corporate and personal, and unfortunately, it’s often hard to separate fact from biased opinion.
This is especially true in the mortgage world, where the financial crisis of 2008 greatly tested people’s faith in certain financial products. One has to look no further than the FHA Loan, which, since '08 has been burdened with an unfair reputation as being a sub-standard product.
Let’s dispel a couple of myths:
FHA Loans are Only for First-Time Buyers
Absolutely incorrect. It’s true, FHA loans are a great resource for first time home buyers, as they offer low down payments options and potentially lower interest rates for people just starting to build their financial future.
However, the option may also benefit those with a less-than-stellar track record, financially speaking. Individuals with lower credit scores or a bankruptcy in their past often have a hard time qualifying for a conventional loan. An FHA mortgage is a solid option, allowing the option of home ownership to those who need to continue and improve their own financial record.
FHA Loans Are Way More Expensive Than Conventional
Here is where your own financial situation really comes into play. The truth is, FHA loans can be more expensive — but they can also be significantly less expensive, depending on the particulars. With an FHA loan, you have the option to put less money down up front, and interest rates are often less than comparable Conventional rates.
The thing to pay attention to with an FHA loan is the mortgage insurance (MI). You pay your insurance in two parts — an upfront premium that is built into your loan amount, and the monthly insurance premium that you pay with your mortgage bill. Since the upfront amount is based on a percentage of your loan amount (1.75%), this will cost more to individuals looking for larger loans. The monthly MI amount on an FHA loan can be higher or lower than a conventional loan based on certain conditions, such as the area in which you live.
Which loan type works for your current financial situation depends on several different factors. That is why it is so very important to speak with a Midwest Lending mortgage professional. We look at your big picture — and we will never put you in a loan program that you can't afford. We're here to pair you with the perfect loan, so call or email today!