Hello my brethren, My wife and I are looking at finally buying a house. We are in contract on a short sale for the ideal place...we have no problem making what the monthly payments would be, but we are short on cash up front (had a baby eights months ago and still paying that off). I have heard really positive things from several people I know who have utilized FHA loans to get into their first homes...any of you have experience with this? What are the positives/negatives? Any information would be helpful - I'm meeting with a mortgage broker tomorrow and want to be as well-informed as I can be. I have read all about them online, but some information from people who have actually lived it would be great. Thanks!
Congrats on the new baby and the soon to be new home! FHA loans are a great way to purchase home, as it requires just 3.5% down payment and a less than stellar credit score (min of 620). The downside of the loan vs conventional is that you will always pay MI for the life of the loan. With a conventional loan, you will pay MI for at least a year, or until you have at least 80% equity in your home. Good luck with your mortgage broker. If that doesn't pan out, my good friend is a broker who I've used for my past 3 homes.
or do a Fannie loan and a line of credit as a 2nd loan to cover whatever you can't put down to get to that 20% threshold... if you have a great credit score, the monthly payments on the LOC will be lower than PMI
This. If the last decade has taught us nothing else, everyone should at least be aware of this by now.
owning a house is going to cost more than the monthly payment. having a baby is just as expensive as owning a house. just because you're a "family" now doesn't necessarily mean you have to go buy a house. continue to save. like rocketfan said, if you don't have 20% you can't afford it. having money in the bank is better than home equity when you're feeling the financial crunch.
I got an FHA loan and only put $5k down. When the interest rate dropped again about year and a half later I did a streamline refinance which dropped my monthly mortgage about $200. I don't think that scenario will happen again, the interest rates are about as low as they're going to get. And from what I've been told, home sales and values in Vegas are slowly increasing. Don't know if that's much of a barometer for the rest of the country.
There are a lot of special programs that can help out first time homebuyers with their down payment. You can also ask your broker to give you a higher rate with a lender credit. I work on the product/capital side of mortgage and I've seen really good rates offering lender credit to help pay closing costs on 15 year terms. If the payment isn't as much of an issue, a 15 year FHA loan with the maximum lender credit you can get (I believe it's 3.5% of the loan amount) to pay your closing costs is a great idea. Alternatively, some localities offer bond programs to help first time homebuyers with their down payment, and also offer 15 year terms on FHA loans. If you're short on cash, down payment assistance and options like lender credit should be appealing. Anyway, if you decide to go through another lender, send me a PM and I can hook you up with a broker who's very knowledgeable in these areas and can help you out.
This is also good advice. If you can't afford the entire 20%, you can borrow a smaller amount to put down on the home; the benefit with this being that you'll be able to remove the mortgage insurance payment once the outstanding balance on your loan reaches 78% (I think) of the appraised value of the home.
I'm not aware of this ever happening, except in very particular instances. And in those instances, the investment banks that capitalize those loans are aware of the risk of default and are compensated for it, in addition to their own hedging measures.
Thanks for the info people! Keep it coming. Here is my problem, for all of you saying that I should wait until I can put 20% down. I'm not saying you're wrong, but I can tell you this: I live in Seattle and my two-bedroom apartment costs me more than I'd like to say. I can tell you that this house, even with PMI on an FHA loan, will leave me with a lower monthly payment (that is straight from my mortgage broker last night - we looked at the figures). It's awfully hard to look at that dynamic (and the fact that rent isn't exactly trending downwards) and say that a home purchase is a bad idea at this juncture. Especially combined with the fact that my child has some special dietary needs due to being diagnosed with a rare condition (PKU) that doesn't exactly yield tons of EXTRA money after doctor bills, the aforementioned rent, etc. Thoughts?
the last thing you want to do is trust the numbers from your mortgage or real estate broker (ignore this statement, i see you looked at yourself). how much lower is the mortgage? the lower payment may be offset and a lot of times exceeded by the hidden costs of owning a home. i'm not trying to discourage you from buying, but inform you that's it's not as simple as monthly payment. is the house further from your job? can you afford to pay for lawn care? your utilities will also likely be higher. insurance is more expensive. with an apt, you're only worry is paying rent. with a house, you need to worry about the mortgage, interest, maintenance, upkeep, repairs, insurance, the roof, the a/c, the heater, etc. houses are money pits. here is a link that i think you'll find useful. http://patrick.net/housing/crash3.html
I have an FHA loan on my house that I bought in 2008. I personally disagree with the you shouldn't buy a house if you don't have 20%. I've owned 3 houses over a 10 year period and never once put down anywhere close to to that. I've also never had a problem making my payments. Of course you should use common sense and be honest with yourself about what you can afford.
I just got one myself, and I've been in my place a short while now I actually put my 3.5 down and the seller paid most of the closing costs Those are the things you have to worry about up front so make sure you have it covered Other than that, our lender was great. It was through a credit union, so if you have one try that, they are definitely more helpful since they work with the relationship moreso than just looking at you as a number. FHA requires certain things from the homes you buy to be straight to give you the loan so get something that of course isnt all in need of tons of repairs. Honestly, if you have your credit pretty straight, and you make sure you have the documents they ask you for whether its tax statements, bank statements, check stubs, W2's.... you'll avoid all of the horror stories you've heard by a mile.
