Here’s a quick quiz. The answer may surprise you:
True or False:
FHA loans are always the least expensive and best option for first-time homebuyers. AND, many also believe that First Time Home Buyers Programs with DOWN Payment Assistance is a must to buy a home...
The answer is...
There is a time and a place for an FHA loan. Depending on factors like your credit score and debt-to-income ratio, an FHA loan could be the best fit for your borrowing needs.
But not always. This was the case for one recent borrower (let’s call him William) when he came to me with Wanting a Mortgage with Down Payment Assistance. There is a time and a place for down payment assistance BUT in Williams case he had a 401K where he could borrow the money from himself and not relying on the down payment assistance.
Read on to find out how walking away from an FHA Loan helped him actually save money on his monthly mortgage payment.
The Story of a First-time Homebuyer
William was referred to me by his Realtor a few months back. He had heard from his friends that every first-time homebuyer should use an FHA loan.
He believed FHA loans allowed you to put the least amount of money down.
He believed an FHA loan would have a lower monthly payment.
He believed he could only qualify for an FHA loan because he was a first-time home buyer.
He also believed pairing a down payment assistance program with the FHA loan would be ideal for him, allowing him to bring the least amount of cash to the closing table.
It turns out that in his financial situation, an FHA loan with down payment assistance resulted in a monthly mortgage payment that was actually significantly higher than what he thought it would be. And, in turn, more than he was prepared to pay.
Luckily, I knew better and he was elated to be shown an option that would allow him to purchase his dream home!
Why I Encouraged William To Consider a Conventional Mortgage Loan
William had great credit and the ability to bring a small down payment to the table, even though he could have qualified for down payment assistance.
Because I take a holistic and mindful approach to mortgage lending, I wanted him to see all the options available before deciding which one best aligned with his financial goals.
When we compared the FHA including down payment assistance with a 3% down conventional option, the conventional loan was the best choice for him and his goals hands-down.
His main goal was to keep his monthly payment as low as possible, and I was able to save him $300 a month on a $200,000 house by using a conventional loan!
A great place to start is getting pre-qualified and it’s never been easier.
If you have questions or when you’re ready to get the ball rolling, contact me at 480-313-7103.