- This topic has 3 replies, 4 voices, and was last updated 2 years, 10 months ago by
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I want to know what the downsides are for this. It appears to give me more options as a first-time home buyer and I don’t need to have as big of a downpayment which will be helpful. I just want to know what the downsides are of this kind of loan before I decide this is what I will get.
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The only main one I can think of is that you have to pay monthly for mortgage insurance. This is not an optional thing. So you would be paying for house insurance and mortgage insurance which can be costly depending on the house size, location, and what kind of area the house is in.
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When you put down less than 20%, you must pay for mortgage insurance and this is by law. With the FHA, you are only expected to put down 3.5%. I think for people going with this option, you have to really consider if you can/should be buying a house. Ideally, you have anywhere from 20 to 35% of the house’s cost in the bank and ready to use. Also, you have to factor in closing fees which range from 3k to over 10k.
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I looked into this a few years back when I bought a house and it is true! We (my wife and I) ended up doing an FHA loan however because we didn’t have enough money saved up to pay the 20% down with closing fees.
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