San Diego FHA Mortgage Loan Pros and Cons (2017 Update)

If you’re starting to look for a house, then you know the importance of getting the right type of mortgage loan.

While I have mentioned all the different types of loans that you can get on my blog, you may still need some help deciding which type of mortgage loan is right for you.

Let’s start talking about the FHA mortgage loan.

San Diego CA FHA Mortgage Loan Pros and Cons

San Diego FHA Mortgage Loan Pros and Cons (2019 | 2020 Update)

If you’re thinking about going with an FHA loan, but are still considering other, more conventional options, then this pro and con list can help you decide.

If you have more specific questions about the items on this list, then I would suggest checking out our post about the FHA mortgage loan or the Q&A post.

Either post will be able to help answer all the questions that you have about the FHA loan.

If you decide that you’re interested in getting an FHA mortgage loan, then get in contact with me and I’ll be able to help you get that loan started.

Take a look at what FHA loans are good for, and what might make them not the best fit for your situation.

Must Read: San Diego FHA Mortgage Loans - Rates, Terms, Limits...

Pros

San Diego FHA Mortgage Loan Pros and Cons (2019 | 2020 Update)

Lower Credit Score

If your credit isn’t the best (around 500) then you will have major problems trying to get a conventional loan, but these loans are easier to get into because they do accept people that have lower credit scores.

This means that people that wouldn’t normally be able to get the financing to secure a home are now able to try and look for a home of their dreams within the limit of the loan amount.

Lower Down Payment

Although how low of a down payment you can put and get the entirety of the loan depends on factors like your credit score, the average payment is still lower than a conventional loan.

With a conventional loan, you should expect anywhere from 5% to 20%.

With an FHA loan, you can see down payments as low as 3.5%.

Easier to Refinance

Refinancing is often difficult with banks and can incur some penalties.

With conventional loans, you can improve the term and rates of the loan that is already agreed upon.

With an FHA loan, it is possible to refinance up to 97.75% of the home’s value.

The FHA also offers the ability to use an FHA Streamline.

This refinance method essentially allows people to refinance without an appraisal (which would be necessary with a conventional loan) and not a lot of credit requirements.

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Government Backed

Because the government is the one that is behind these loans, it allows for the opportunity for people to get a loan that they might not have otherwise been able to get.

The ability to get a loan when you’re starting out or don’t have the greatest credit can really help someone get on the path to planning out their future.

Similar Choices to Conventional Loans

While it doesn’t have all of the same options, there are many things that FHA mortgage loans and conventional loans have in common.

Conventional loans have fixed-rate mortgages as well as adjustable-rate mortgages.

Both of these options are available to those that are looking at FHA loans.

You will also get a number of choices when it comes to the term length of your mortgage loan, which means that you’ll be able to pick something that will most likely work for you.

Cons

San Diego FHA Mortgage Loan Pros and Cons (2019 | 2020 Update)

Mortgage Insurance

While many mortgage loans come with mortgage insurance, the amount of insurance with FHA loans is more than a normal loan.

Not only does an FHA loan require an upfront insurance payment of 1.75%, but they require constant monthly payments as well.

While these payments are factored in when the lender looks at a potential borrower, this means that it will take longer to pay off a loan that you could have gotten elsewhere.

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Loan Terms

While there are options to pick from when you are considering an FHA loan, many people find that FHA loans don’t offer the same wide selection that conventional loans offer.

For conventional loans, you will typically see terms from 10 to 30 years, but the options for FHA loans are much more limited within those parameters.

They do have terms that are below 15 years and over 15 years, so there are still options.

There are just fewer options.

Higher Rates

Because these loans are more accessible, they have to make sure that the risks associated with lending to people that would otherwise be denied are balanced.

The end result is that there are higher rates than typical conventional loans.

If your credit score is high enough to get a conventional loan, then you might think twice about going for an FHA loan just because of the higher rates.

You can always check out the rates for the San Diego area with my handy tool.

Requirements for the House

Because the government is backing the purchase of a home, they have requirements about the house. 

If you’re getting an FHA loan, but the house doesn’t meet all of the FHA requirements, then you might find yourself stuck. 

If the seller doesn’t want to pay to make the repairs, then you will either have to pay for the repairs yourself or give up on the house.

This can cause problems in certain situations, especially if you find that you don’t have enough money reserved to pay for these repairs that would be necessary.

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Availability for Secondary Homes

FHA loans just aren’t available for anything but a primary residence. 

The lower loan rates are only available if you are looking for a residence that would be your primary residence.

This also applies to purchasing properties for rental use.

An FHA loan wouldn’t be available to those that are looking to purchase a home or property in order to rent it out.

You would have to get a conventional loan in this case.

What do you think?

Leave a comment below - or, call/text me at (760) 297-4539

Your FHA Insider, 

Scott

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