FHA alternatives to buying a home?

My fiance and I have decided last year to start saving up for a home. A few months ago we started saving slowly and trying to see if we should pay off credit card debt with money we have saved up so far. I am studying for real estate as well and I am a bit up to date with FHA regulations and does not seem to work for us.

We would like to save at least 10-15% downpayment but really don't want to go FHA route for reasons that you pay that for life of loan, and you cant rent it out if you decide to later on especially because its a lot of money to by time your done paying off. How can we purchase a home with 10-15% and avoid FHA?

How does it work if we were to get a second small loan to combine that with our downpayment to have the full 20% down?

2 Answers

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  • Bob
    Lv 6
    6 years ago
    Best Answer

    FHA is not the only alternative when you have less than 20% to put down on a home. If you have at least a 660 credit score and at least 3% of your own funds to put down, conventional financing costs less than FHA financing every time. If you have 15% down, PMI on a $100,000 conventional loan can cost as little as $23.33 per month as compared to an FHA costing $108.33. Conventional PMI stops when your balance falls below 78% of appraised value(or sooner) while FHA continues for the life of the loan.

    It is much harder to find lenders that can do "piggy back" loans than it used to be, but if you can find one who will make sure you compare the terms to a single loan with PMI. With 15% down the PMI payments continue for only about 57months, while the piggy back loan payments can last much longer. Often you may have a lower initial payment with the second loan while paying more in the long run.

    FHA does not bar you from renting your home for the life of the loan. The standard FHA mortgage in Ohio says you must reside in the home for at least one year unless it will cause an "undue financial burden."

    http://www.mgic.com/pdfs/71-61210_bpmi_monthly.pdf

    Source(s): Licensed Loan Officer in Ohio
  • 6 years ago

    Who told you can never rent out a property financed by FHA.....that is simply not true. If you live in the property as your primary residence for over 12 months you can then rent it out. The biggest disadvantage of an FHA loan is that you now have to pay mortgage insurance (MMI) for the life of the loan. You might consider and USDA loan that requires no money down but they make these loans on properties in rural areas.

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