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Mike in Tucson
FHA Rumors & Myths about FHA LOANS
FHA Mortgages have gained popularity in the last 2 years because of the demise of the subprime mortgages and because of conventional loans. Conventional loans have become harder and in some cases, more expensive depending on your credit score and down payment.
In any case, I am still hearing some negative comments and input about FHA loans. I have been doing FHA loans since 1993 and I never felt that they hindered the loan process. These rumors are usually started by those that aren't as experienced in doing FHA mortgages.
List of FHA Rumors & Myths
- FHA Origination Fees - This one angers me the most. If you ever have a loan officer tell you that part of the origination fee goes to FHA or HUD, don't walk, but run from them. The handbook states that this fee is for administration purposes. In reality, it can be used for the lenders costs or to buy down your interest rate. PS. I actually had a previous client was told this by a loan officer.
- FHA Loans take forever, sometimes up to 2 months. Well, many loans are taking a little longer now because of all the checks and balances when it comes to the mortgage process. But if you are speaking to a very good loan officer and if they do their job properly upfront, then things should get done in a reasonable time. What is a reasonable time frame? 30 days from start to finish for a loan to close.
- FHA appraisals are more harsh than conventional appraisals. This one always made me laugh. First, let's start with the realtor who should be looking out for your best interest. Why would anyone want to purchase a home that might need repairs. Secondly, FHA did away with the VC sheet prior to 2003, so we are just talking about specifics in most cases. Overall, it's not because it's an FHA appraisal, but more so because it's harder to comp for values in some areas.
- FHA loans are more expensive than conventional loans. - This one would need to be broken down because there are to many variables and factors. The general fees and rates should be almost the same with any lender out there. For a better glimpse to why FHA loans might be cheaper, even with 10% down, please read this post. FHA loan vs Conventional loan with a 659 credit score
Summary : FHA loans in my opinion, are excellent for many borrowers. It just comes down to speaking with a very qualified loan officer who will ask the borrower about their goals, to figure out what loan best fits that borrower, not what's easy for the loan officer. And seriously, people need to stop listening to their friends, neighbors, family members, and some realtors that just don't know any better. There are also some loan officers that just don't know better or might be afraid of such loans as FHA loans, USDA loans, or VA loans. Just choose the loan officer wisely.
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For more information on FHA loans, please go to this link. The FHA Expert
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
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