FHA Loans Question Pros and cons

[Scott Nguyen]

Hello Everyone,

I'm a new investor looking to purchase my first property. I have heard about FHA loans and wanted to learn more about the pros and cons of it. I understand you get to put down a low down payment and that the credit score requirement is quite generous, but are there any other drawbacks I should be aware of?

It sounds too good to be true. 

[Joe Doman]

FHA is great for 2-4 family properties that you live in. Conventional (non-portfolio) loans require 20%+ even if owner occupied. You will pay mortgage insurance premiums up front as well as monthly. I did an FHA on a duplex back in 2012 and paid maybe 1,800 up front and 130 per month on a $180k loan. Another down side is you need to wait a full 5 years until the monthly mortgage insurance is removed, and only if you are at 22% equity based on original appraisal. For small multi family properties, FHA is a great option! (the rules may have changed since 2012 so do not take my word for it!). Best of luck!