January 10, 2023
Is it wiser to rent or to buy your home?
For some borrowers, it makes more sense to make a mortgage payment than to commit to a monthly rental payment. These borrowers should definitely explore their FHA home loan options and compare the cost of renting to the costs of owning.
FHA Loans Can Help You To Stop Paying Rent
Buying your home with an FHA mortgage means no more waiting for the landlord to repair crucial areas of the home. Homeowners are free to schedule or make their own repairs or upgrades without having to wait for someone else to get around to scheduling those necessary appointments.
Buying a home with an FHA mortgage means no more apartment hunting, paying application fees or security deposits, etc.
FHA Mortgage Loans Have Lower Down Payments
If your FICO score qualifies (580 or higher under FHA loan rules, check with your lender for any additional requirements) you can make a down payment on your new home as low as 3.5% of the adjusted value of the property.
Compare that with other types of mortgages and see how 3.5% stacks up against conventional loans. You may be surprised at the numbers.
Also, FHA loans permit the seller to contribute up to six percent of the asking price of the home towards closing costs (but NOT the down payment). That can also reduce your out-of-pocket expenses. If your goal is to pay less upfront at closing time, the FHA loan is something worth exploring.
Some borrowers may not be happy about having to make any down payment at all, but it’s good to compare your down payment with the number of apartment security deposits you’ve made in the last 10 years and how many more you might make over the next decade. How do the numbers compare?
FHA Home Loans Can Be Refinanced Into Lower Rates Or Monthly Payments
Once you have made enough payments on your FHA home loan, you are eligible to apply for an FHA-to-FHA Streamline Refinance that must result in some type of benefit to the borrower such as a lower interest rate, lower payment, getting out of an adjustable-rate mortgage and into a fixed rate loan, etc.
FHA Streamline refi loans have no FHA-required credit checks or appraisals in most cases. Ask your lender what’s required for such refinance loans at that financial institution but know that FHA Streamline can be a big help when it comes to getting more savings out of an FHA mortgage or ending the uncertainty of an adjustable-rate mortgage.
FHA Mortgage Loans Can Make You A Landlord
Borrowers who apply for FHA home loans to purchase multi-unit properties can buy a home with as many as four living units (under FHA loan guidelines, check with your lender to see what is permitted at that financial institution).
Occupancy of the home purchased with an FHA mortgage is required as a condition of loan approval but borrowers may rent out the unused units of the property and earn income that can help pay the mortgage.
Some borrowers want to use the potential rental income to qualify for the loan, but lender requirements and the borrower’s experience as a landlord (or lack thereof) will factor into the decision to allow this where applicable.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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