August 1, 2019
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FHA Plano

Is an FHA mortgage loan a good choice in Plano

The debate on FHA mortgage loan is still raging on. With its outstandingly low down payment and credit score requirements, the FHA loan program is gaining popularity. More so in Plano because of the many people moving in. But is it really as good as it seems? As much as it offers such good deals, the FHA mortgage loan uses other ways to plow more money back to itself. These ways prove to be disadvantageous to the borrower.
Low down payments of up to 3.5% are attractive but if this is the reason why you are going for the FHA loan, then you are not financially capable. A low down payment means that you will be borrowing 96.5% from the lender. The lower the down payment the higher the interest rate which equals an overall cost higher than the actual price. If getting a Plano FHA mortgage loan then try to pay for more than 10% down payment.
The upfront Private Mortgage Insurance (PMI), is another added cost. PMI is about 1.75% of the total loan amount and is paid at closing. Although it can be tied into the monthly payments, its price increases significantly which also adds up to the overall amount.
The annual Mortgage Insurance Premium payment does not benefit the homebuyer in any way but still adds quite an amount of money. The MIP is helpful to the FHA loan lender as it benefits the buyer in case the borrower defaults.
Property restrictions are one of the biggest downsides of FHA mortgage insurance. The HUD governs all the FHA loan programs and is very strict when it comes to the property type. HUD requires all the properties to meet certain standards. This forces the home buyer to pay extra in order for the property to be renovated. HUD also a maximum limits a home loan can be.
Despite the cons that come with the FHA mortgage loan, it does have its upsides. The low down payments and credit score give an opportunity for low-income earners to buy homes. If the borrower fulfills all that is required of them then FHA mortgage loan pays off in the end. The flexible debt to income ratio allows a DIT of up to 43%, unlike other mortgage programs which allow of only up to 40%. Thirdly, the FHA mortgage loan allows the borrower to receive gift payments.
Finally, the decision of buying a home through the FHA mortgage loan is up to the buyer. The FHA mortgage loan makes no financial sense to the home buyer but if you have the ability to afford it then it’s okay. Otherwise, it’s best if you, as a homebuyer, invest in other types of mortgage loan programs.