|
Typically, loan programs administered by FHA have lower interest rates than those of conventional loans. FHA loans for single-family is known as “Section 203(b) loan. Here are some major advantages of FHA loans over a convention loans.
- Interest rates are usually lower than the conventional fixed interest loans.
- There is no prepayment penalty for any FHA loans.
- Comparing to conventional loans, most of the underwriting guidelines are less restrictive.
FHA loans do, however, have a few disadvantages.
- Home borrowers for the standard Sections 203 (b) are required to make 3 % down payment. Borrowers with good credit and a fairly large income can avoid making down payment by applying for conventional no-down payment mortgages.
- Borrowers need to make a Mortgage Insurance Premium (MIP) at closing. In addition, there are annual premium that can be included in monthly mortgage payment.
- There are 1 % loan origination fee charges on your FHA loans.
- Comparison for conventional mortgage loans, appraisal guidelines for FHA loans are stricter.
- Generally, processing time for conventional loans is shorter than FHA loans, because conventional loans do not need to go to the government red tapes.
- Buyers and sellers may need to pay other closing costs to FHA financing.
- A seller may decide to sell at full price, because a seller needs to pay heavy costs to help FHA buyer.
More Articles :
|
|