FHA Loans – The Pros and Cons of Getting an FHA Loan

hi everyone your Tampa Bay real estate expert Lance Mohr in this video I want to go over the FHA loan what is the FHA loan what are the pros and what are the kinds great so FHA stands for Federal Housing Administration and they're a department in HUD which is the Housing and Urban Development now what FHA does is they actually insure loan so it's the government insuring the loan of default for the lender so FHA has a lot of advantages the main advantage that people like about FHA is their low downpayment it's a formula but it's approximately three and a half percent and like all loans they'll allow the seller to pay your closing costs they'll also allow your a relative or a close family member to give a gift and pay your down payment as well so that's a real advantage for a lot of people most people think of the FHA loan is just a first-time homebuyer loan it isn't it not necessarily the one thing is you can't have an FHA loan and get another FHA loan at the same time some other advantages of FHA is their interest rate is generally better than a conventional loan now when I say conventional most people will think of Fannie Mae or Freddie Mac loans they are also a little bit more flexible when it comes to the debt to income ratio you can generally go a little higher on an FHA and they're a little bit more flexible with the credit scores your credit score could be a little lower on the FHA so there's a lot of advantages but probably the biggest disadvantage if they're if there ever is any is the fact that you have to get mortgage insurance it's not private mortgage insurance like Fannie Mae and Freddie Mac with FHA it's just called mortgage insurance but it's not that you have to get it it's just the mortgages sure stays with you the life of your FHA loan so let's say you buy a home and you maybe you are a first-time homebuyer you buy at home and the average price in your market is $200,000 you live in the home for six years and you're ready to move out and you want to rent it well you're going to be paying that mortgage insurance unlike a conventional loan it's not going to go away so generally speaking and the lender is going to know your situation they'll be able to give you some good advice if you could get a good honest lender is generally speaking most people don't want to go on an FHA loan for the mortgage insurance reason unless you have to most people will opt to put if they can put 5% down or if they're putting more down but there may be some reasons the FHA would be the best for you and again get a good loan officer they'll be able to tell you this if you have any questions let me know I'm not a lender I was in lender lending for a number of years but again I would say find a good loan officer talk to them let them take what's called an application on you look over everything pull your credit scores and give you the advice you need on which loan is best for you and then you can always ask them if they say conventional say why if they say an FHA loan is better for you say why challenge them a little bit so you know if you have any questions give me a call if you like this video give me a thumbs up subscribe and I wish you the best of luck have a wonderful day you