Why An FHA Loan Might Not Be the Best Fit for You
Signs an FHA Loan May Not Be Right for You
Many people need a mortgage of some sort to pull off a home purchase. But that mortgage doesn't have to be a conventional one. If you feel that won't work for you or that you won't qualify, then you may be inclined to explore your options for an FHA loan instead. But if these signs apply to you, an FHA loan may not be the right fit:
- You want to buy a separate investment property
Some people can barely pull off a single home purchase. But you may be interested in buying a second home you don't occupy to use as an income-generating property. That's not necessarily a bad idea -- but you can't use an FHA loan to finance that purchase.
- You have a good credit score
The nice thing about FHA loans is that you can qualify with a credit score as low as 500, provided you make at least a 10% down payment. But if you have good credit -- say, a score in the upper 600 or 700 range -- then you may be better off getting a conventional loan.
- You have decent down payment funds
Making a 20% down payment on a conventional home loan will help you avoid private mortgage insurance. If you can't put down 20%, you might assume that getting an FHA loan is a better choice. But that's not necessarily the case.
There are definitely some good reasons to sign an FHA loan. However, if these specific factors apply to you, then you may want to reconsider your options before signing an FHA loan.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.