In a Bind? Look at FHA to Refinance or Purchase
I can remember a time in the not too distance past when FHA was the ugly sister to the slick conventional mortgage products.
For all practical purposes it was logical. Conventional mortgages are far easier to process due to less demanding underwriting procedures.
Conventional mortgages allowed drive-by property valuations whereas FHA wanted the appraiser to go inside and out.. And take note of repairs required by FHA.
FHA catered to first time home buyers with little down payment and somewhat sketchy credit, like many young people.
The benefit of the program was interest rates were roughly the same as the conventional products.
Over time, with easing of lender restrictions, FHA went by the wayside. Even the 100% conventional products were better than going FHA… At least from the borrower’s perspective.
If I was a betting man I’d say lenders wouldn’t mind a do over right about now.
Of course, we all know what happened. The bottom dropped out, 100% financing went away, the sub-prime market is gone, and alt-A products are not even close to what they once were.
What hadn’t changed with the reversal of fortunes was the general FHA underwriting guidelines. This is a great loan for all types of purchases, except investment properties. It is meant for primary residences.
So, why go FHA. Well, to begin you don’t need a big down payment. Many people don’t have that now. The typical FHA mortgage requires 3% down payment.
And credit is based on payment history rather than scoring.
The light credit requirements are of great help to those with lack of credit or others who hit a rough spot and are in the credit rebuilding process.
A ton of folks have had their credit scores pummeled over the last 24 months.
What I’m getting at here is the government loan is a make sense option when conventional loans are hiding under a proverbial rock.
The government loans keep chugging along and offer a great benefit.
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