Home Loans

[Mossyoakglock]

Hey Guys,

 

We are looking at buying a house and I have a question about a FHA Loan. Is this type of loan worth it? I was doing some research and I from what I found out it sounds like there are more fees and payments associated with that loan than others. It looks like I would have to pay an upfront Mortgage Insurance Premium along with ongoing fees with each monthly payment. Is that true? Would I be better off just going with the normal 30-year fixed-rate mortgage?

 

Anythign else I should know about other than making sure I can pay the monthly payments, not borrowing more than I can afford, etc?

[mfennema]

I am also in the process of purchasing my first house and I am going the FHA route. For me, I am going that route because it gives me the best rate with my and my fiancee's credit scores versus a conventional loan. The up front PMI payment can be rolled into your actual loan so you really don't have to put the cash down there unless you have it available, then obviously you would want to. As far as the monthly payment goes, you would have to make this payment for at least 5 years and if at that time you have at least 22% of your principle paid off, you can get rid of making that payment.

 

Which type of loan you choose depends on what you can get from the bank. If your credit score is below 740 then you'd most likely go with an FHA loan. If you are getting money gifted to you for a down payment from a parent (even if you are paying it back) then you can't do a conventional loan. If you don't have a bunch of cash to put down then an FHA loan is a good choice because it only requires 3.5% down payment.

 

The bank will most likely approve you for more than you really would want to pay on a house because I think they will approve for up to 28% of your gross monthly income to be put toward a mortgage which is a TON more than I'd ever think about paying. You will need to understand what you can afford each month and not be over extending yourself. Don't forget to add in taxes and insurance to your monthly payments too. There are lots of calculators online that will help you understand what size loan will give you what size monthly payment, I strongly suggest checking them out.

 

Good luck!