Why to Never Buy With an FHA home Loan

The big question from home buyers is ” how much will I need for a down payment”. The big answer is far to often “3.5% FHA”. Here, we will help you understand a mortgage and some of the options you might not be familiar with. There is a place to buy with an FHA home loan Palmdale but we will always try different options that have less cost for the prospective home buyer.

FHA Home Loan Palmdale

Let’s use 2 examples of buying a home with an FHA home loan and buying non FHA. In our example we will use a Buyer who is buying a new home in Valencia and trying to get approved for a Valencia home loan. The home price is $425,000. Below is the comparison in getting the Valencia mortgage.

Valencia FHA home loans

• Purchase price $425,000
• 3.5% down $14,875
• Loan amount would be $ 410,125
• FHA upfront cost 1.75% added to the loan $7175
• Loan amount with FHA upfront $ 417,300
• Annual FHA insurance premium 0.80% or $295 month
• 3.5% FHA interest rate= monthly payment of $ 2195 plus taxes,insurance & HOA

Valencia non FHA home loan

• Purchase price $425,000
• 1% Lender Credit < $4,000>
• 2% Seller Concession < $ 8500>
• Normal 5% down $21,250- new down is $ 8,750
• Loan amount would be $ 403,750
• No Upfront cost for loan
• Annual Private insurance premium 0.50% or $168 month
• 4.5% 30 year fixed interest rate= monthly payment of $ 2213 plus taxes,insurance & HOA
• 3.2% ARM with fixed payment for 1st 5 years monthly payment of $ 1981 plus taxes,insurance & HOA

The example shows a lower down but also a similar payment. In our non FHA example, we did include a Lender credit as well as a Seller concession to Buyer. Doesn’t mean you cannot get these with an FHA type loan, but normally not. Speak with your Lender and Realtor to help you with these items.

Now, let’s look at a recent Palmdale mortgage that was accomplished in an entirely different way. It is also one of our favorite home loan senerios. If you do not put 20% down on your home purchase you have to look at home loans that have mortgage insurance added. This is usually called MIP. Our buyer who was looking for Palmdale home loans was able to get a 30 year fixed rate conventional mortgage combined with a Line of credit.

This saw him get the best home loan interest rates Palmdale and also buy with a smaller down payment. He went to open houses Palmdale and even some open houses Valencia and in speaking with multiple Palmdale mortgage brokers, never did this option get proposed. Combining the Lender credit, the seller concessions with the 1st and the line of credit 2nd, the buyer enjoys the home of his dreams.

Experience makes all the difference and can help you find the best solution to buying your new home. If an FHA home loan is the best option, then go for it. Just make sure several other options have been presented and you have been given the opportunity to understand each. Watch for our next post on how to buy a new home with no monthly payments.