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RE: ScaredyCatGuide to Real Estate - FHA LOANS (A quick and easy guide)
beside to every month PMI, FHA loans require to pay 1% for PMI in closing cost.
What is why I consider FHA loans as a legal robbery.
The much better option is conventional loans with 5% down. You wouldn't pay 1% for noting to PMI inside your closing cost and then monthly PMI would be around twice less than for FHA loans. Also you are not required to live in this building.
Well said! I'm with you. I personally refuse to pay PMI and have been lucky enough to afford 20% down on all my properties. Unfortunately, many people struggle to come up with 3.5% and thus use this loan for that benefit.
When I bought my home my lender-bank insisted to take FHA loan and after checking all numbers we refused a sale.
I decided it just doesn't have any sense to pay 1% PMI inside closing cost for noting because I'd rather add this 1% to my down payment ,find additional 0.5% to make 5% down and take conventional loan instead of FHA.
Also I compared monthly PMI payments for both for the same property - $315 for FHA and $157 for conventional. for me it was just nonsense to take FHA loan.
we were lucky. Market went up and instead of waiting required 2 year for removing PMI, I refinance our home after 1 year without PMI
I remember, but might be I'm wrong FHA also has some time period when you cannot refinance it. Something 3 or 5 years.
You definitely made the right move. Yeah FHA makes you pay PMI for minimum of 5 years, regardless of the equity you have in the home. It's kind of crazy.