Are FHA Loans Too Costly?

Since the subprime mortgage crisis and the inflation of housing prices, many people have been hesitant to apply for new loans, and with good reason. Since the housing market crash, banks and lending institutions are scrambling to make up for money that was lost through foreclosures. They are doing this by adding hidden fees, charging more for closing fees and down payments, hiking interest costs and more. You might also be wondering – are FHA loans getting too costly? While there have been a few changes to the FHA loan program over the years, they are still much more affordable than conventional loans.

Down payments

High down payments is one of the big reasons Americans are foregoing homeownership. Right now conventional loans require around 20% for a down payment, which in today’s market adds up fast. With an FHA loan, it is still possible to qualify for a loan with as little as 3% down. Plus, the FHA allows this money to come from any source, whether it’s from your employer, family member or charitable organization. This means that even if you don’t have huge savings, you will still be able to qualify for a new mortgage.

Good Faith Estimate

Closing fees are another huge expense associated with conventional loans, and one that varies widely from lender to lender. The FHA tries to keep this fee as low as possible, and requires its lenders to provide you with a Good Faith Estimate of all potential closing fees associated with originating the loan. This way you will know how much you will owe at the end of the loan process.

Interest Rates

FHA loans are still less expensive overall than conventional loans. This is because, as an FHA-insured borrower you can take advantage of competitive interest rates. Even if you get a rate that is higher than you’d like to pay, you have the option to apply for a streamline refinance in the future.

While it is true that most conventional loans have gone way up in price over the past few years, the FHA has taken measures to ensure their loans are still affordable. If you are interested in obtaining an FHA loan, take a minute to fill out our secure online form and we’ll be happy to help you on the road to homeownership.

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