Lowest Rates and Always there with 96.5% financing on a Purchase
FHA is such a versatile program. It allows for extremely low rates all the time and can accommodate borrowers with low credit scores with 96.5% financing.
One of the best benefits of FHA is that the program allows for a higher debt ratio than conventional. FHA allows for total DTI at 55% where conventional loans max out at 49%.
Now we can go one step further by qualifying the borrower by the ARM rate which is currently in the mid fives for the 5/1 and even lower for the 3/1
Buy a Home on a "Taco Bell" Budget
FHA mortgages are an excellent alternative to conventional loans because they are designed to accommodate low money down options with lower credit scores. Another great feature is that the PMI is calculated the same way no matter the credit score. Conventional loans have PMI that is extremely sensitive to credit score
FHA Mortgages are designed for Single Family Residences and Townhomes They are not really used for Condos
- An FHA mortgage only requires a 3.5% down payment.
- The maximum debt ratio with an FHA loan is 55% compared to a conventional loan that is 49% or lower.
- Sometimes an FHA loan will yield a lower monthly payment than the conventional loan. This is due to high or low credit scores. With FHA, if your score is 660, you get the same rate as the borrower with the 780 middle credit score. We will do the math and always look at the conventional loans as well.
- Mortgage insurance needs to be refinanced off the loan unlike a conventional loan that allows the PMI to be removed when the mortgage balance reaches 78% of the value of the home.
- Many Realtor listing agents do not like FHA offers because they feel the the borrower might be a shaky or the appraisal might be more scrutinized because it’s FHA. We don’t agree with either one of these ideas.
- FHA requires monthly mortgage insurance as well as an increase to the total amount financed in the amount of 1.75% to the base loan amount so you finance 1.75% more of a loan amount compared to conventional.