1. FHA (US Federal Housing Administration) has mortgage insurance no matter how much you put down. A lot of people assume that, since with a conventional loan if you put down twenty percent you don’t have mortgage insurance, so with FHA it must be the same. Wrong! FHA requires monthly mortgage insurance regardless of how much you put down . Now, depending on how much you put down, the time that you have to have the mortgage insurance varies. But it’s not short. So, for instance, with 3.5% down on FHA, you would have mortgage insurance the entire loan, unless you refinance. That is generally what people do, is they get into their home with FHA and then as they pay down the mortgage or the equity increases, they refinance into a conventional mortgage. To avoid that mortgage insurance. But if a lender’s telling you “Well, you put down twenty percent, you don’t have mortgage insurance,” that’s not true, so you want to make sure you check. That’s the first thing.

 

2. People assume that all lenders charge the same for FHA mortgages, since FHA is a federally insured loan. They assume the government is setting the rates and then lenders just do the loans. No! There are huge price differences with FHA mortgages, depending on what lender you talk to. We did a secret shop recently, and we actually saw as much as 1.25% in rate difference based on what lender you spoke to. Same exact scenario, shopped at the same time within a 2 hour window, which is how you want to shop rates. 1.25% percent based on what lender you talk to. So, if you’re looking at an FHA mortgage please compare rates. Please call me, it is one of my favorite loans and I know how competitive we are. Let me show you a second option for a rate.

 

3. You need to know about FHA is that FHA is a great door opener. I like to use FHA as an example in areas that are high cost. A high cost area would be like San Francisco, Alameda, Contra Costa, and you can’t do 3% up to the conforming high balance limit. You can only go up to the current conforming limit, which is $484,350, with 3% down. But the FHA limit’s much higher. In San Francisco it’s $726,525. You can go up to that as a loan amount with 3.5% down with FHA. That’s a great option, you know, it can be super hard to save money especially since rents are increasing faster than housing prices. FHA can be a really good option there. Another good option is if your credit is less than perfect. With FHA you’re going to have much better monthly payment than a conventional mortgage if you have a low credit score.

FHA can be a great mortgage you just want to make sure that you understand that it has mortgage insurance , you shop your rate, and then you know some of the benefits. If you have questions or comments or I can help you out with an FHA mortgage, please feel free to reach out. I am at 707-478-0637 or beeston@rate.com

All my best,
Jen

Jennifer Beeston
VP Mortgage Lending