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Updated over 9 years ago on . Most recent reply

Account Closed
  • New York City, NY
4
Votes |
39
Posts

Is A FHA Loan Really Worth it?

Account Closed
  • New York City, NY
Posted

As someone who has very little money to start with, there are a number of ways I can finance my first property and a FHA loan seemed pretty appealing due to the low down payment.

After completing further research the monthly payments seems to be pretty ridiculous with the monthly loan payment,  Interest rates, taxes and premiums. 

Can anyone tell me about their experience with an FHA loan. Is the low down payment worth it or would you have used a different method to finance your property?

Most Popular Reply

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190
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90
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Will Chamberlin
  • Rental Property Investor
  • San Rafael, CA
90
Votes |
190
Posts
Will Chamberlin
  • Rental Property Investor
  • San Rafael, CA
Replied

Hi Nylisha,

My wife & I went FHA for our first property, a 2 family in NH. We lived in it for a couple years then bought a SFH and moved there. It was definitely some effort but we got in for 3% down. That was before things stalled in 2008 so it hasn't cash-flowed like we thought but has been break even while the tenants are paying down our principal.

I would run the numbers and make sure that whatever route you go the house cash flows if you don't live in it. We were able to charge top-dollar when we lived there but since moving out the rents have been depressed a bit so we are getting less now.

I don't know of the current FHA requirements but I think that now if you put < 10% down you are stuck with PMI for the life of the loan so make sure to factor that in as well. We were able to drop ours at 80% LTV which really helped. As far as the monthly payment, taxes, etc. I don't have actual numbers but I would think that they will be similar regardless of which product you go with. The taxes should be the same as well as the home insurance. If you get a better rate with FHA then it might be cheaper than conventional. That said, you may not be able to get conventional financing with only 3% down.

Overall I would say it was worth it for us since we got a house way earlier than we otherwise would have and still have it 12 years later with a 30 yr fixed, relatively low interest rate loan.

- will

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