While an FHA loan may be a lifesaver before you apply if you want to buy a home and have limited cash on hand or a not-so-great credit score, these loans do have some drawbacks you should be aware of.
- Really strict assessment criteria. The U.S. Department of Housing and Urban developing (HUD) has strict home appraisal criteria that exclude many properties from FHA loan eligibility. The house even offers to become your main or major residence, as an investment property (though FHA loans can be used for some multi-unit properties up to four units) so you can’t use it. Mobile houses along with other dwellings that are prefabricated qualify, but many condominiums cannot.
- Mandatory mortgage insurance coverage. Borrowers with lower fico scores are statistically almost certainly going to miss re payments or standard on the loans than people with higher fico scores, so lenders need FHA borrowers to pay for home loan insurance coverage to mitigate the chance.Continue reading