FHA Loans - Posted by Carl

Posted by carl on September 20, 2006 at 10:43:28:


FHA Loans - Posted by Carl

Posted by Carl on September 20, 2006 at 09:31:34:

What is the point of an FHA loan?

I always thought the point of an FHA loan was to get rid of PMI on a loan in which you have a small down payment.

Now I’m reading somewhere that if I get an FHA loan, there is a 1.5% up front insurance premium plus a monthly premium of .5% of the loan amount divided by 12.

So aren’t these extra costs just as bad as paying PMI?

I don’t get it.

I may as well get a traditianal loan and pay PMI (if I’m putting down a small percentage).

Re: FHA Loans - Posted by jeff

Posted by jeff on September 21, 2006 at 11:27:25:

you dont want MI? go with an 80/20 combo package, the rate on the second will be higher but still alot less than the MI. or with a nonconforming product, most of our nonconformers dont require MI (although the rates will be higher).

Re: FHA Loans - Posted by Michael Steele

Posted by Michael Steele on September 20, 2006 at 10:33:20:


The point of an fha loan is government funding that is not as harsh on credit challenged individuals as conventional financing. It was never to get rid of “pmi”. For the interest rates that fha may charge (similar to conventional rates) pmi is one of those “necessary evils” that must pop up.

Fha is there to give that borrower that has the 580 middle and has been through some hardsips a chance to achieve that same 6% fixed rate as the person that has the 680 and goes conventionaly.

Also fha’s pmi rate tends to be cheaper than most conventional pmi rates due to conventional using a scoring system (level’s 1,2, and 3 for those in the biz) that may actually hike up your pmi payment rather than just having a low fixed pmi rate on fha.

There are many advantages to going fha that I personally would highly recomend, but unfortunatly – “no pmi” is not one of them.

Michael Steele