Lender is Against FHA Loans

[Krystin Aversa]

Hi BP Members!

I am currently looking to purchase investment property, and have been pre-approved with the credit union of which I am also a member. The loan package has a very favorable interest rate as well as additional cash-back incentives. My issue is with the lender himself. In a phone call discussing my long term goal of scaling a real estate portfolio, the lender (specifically, the mortgage originator to whom I have been connected with by the credit union) stated that he never recommends FHA loans. He stated that these are "fall-back" options for individuals with less competitive credit, and that the loan package itself is ultimately more costly than conventional.

While I know that FHA loans can indeed provide opportunities to applicants with lower credit scores, his remarks are counter to what I have come across in my research regarding real estate investing- and that is, to get into a deal with as little cash outlay as possible, in order to preserve cash for the next investment. I have seen many investors use and recommend FHA loans as the most effective strategy for acquiring long-term buy and hold SFH properties.

So my question is, is his take on FHA loans in any way accurate? Are these packages in someway more costly? Or is he providing the more conservative, Dave Ramsey-like mindset that is very much debt-averse by advising applicants to utilize conventional loans?

Greatly appreciate any thoughts and feedback!