Is an FHA loan the best for a 1st time home buyer?

Wondering if an FHA loan is the best choice for first-time homebuyers? Let’s dive into the pros and cons to help you make an informed decision! 🏡💡
Hey y’all!
I did a buyer consult the other day and one of the questions asked was if fha was the best loan product for first time home buyers. I thought I’d share my response with you guys.
FHA has a 3.5% downpayment. The lower down payment is what attracts a lot of first time home buyers.
But did you know that you can get a conventional loan with a 3% downpayment?
And usda and va loans have 0% down payments.
But here’s what you also need to know about fha loans
1. 90-day flip rule: if someone purchases a home and flips it, fha buyers cannot purchase it within 90 days of the recording date. This makes some homes unavailable to fha buyers. I have no idea why this is a rule.
2. PMI or private mortgage insurance is a lender requirement to protect the lender when a buyer puts down less than 20%.
With fha, it is required for the life of the loan. With a conventional loan, after you get to 80% loan to value, PMI falls off.
3. There is an Upfront PMI fee of 1.75% due at closing or rolled into the loan. This can greatly increase your closing costs or monthly payment
4. Condo eligibility - if looking at townhomes or condos, the community has to be approved and registered for fha buyers. If not, an fha buyer cannot purchase it. Don’t know why this is a rule either.
5. There are Stricter appraisal requirements as it relates to safety and security. As it is a government backed loan, the home has to meet certain condition requirements - ie no active leaks, mold, peeling paint, wood rot, etc. Again, this has the potential to eliminate some houses from consideration.
The real answer to the question is an fha loan the best for first time homebuyers is it depends. When you get your preapproval, a good lender will present all options to you. Even though you may qualify for a conventional loan, your closing costs or monthly payment may be lower with an fha loan.
So, I say all of this to say, don’t assume you need to get a certain loan type. Focus on securing the best loan for your situation.
That’s it for today, I’m Ally Harris, re professional. Have a great day!
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Ally Harris, SRS | CLHMS | ACBR
Real Estate Professional
Luxury Residential | Commercial
HomeSmart Elite
@HarrisHomesSell
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