Consolidating second mortgages
In 2017, FHA loans will likely become even more affordable than they have been in recent years, especially if the recently-suspended reduction in annual FHA mortgage insurance premium that the Federal Housing Administration charges is reinstated after a review by HUD's incoming Secretary, as yet unconfirmed by Congress.
Add lower down payment and credit requirements to the mix, and the fact that these federally-insured loans are assumable, and FHA mortgages are an attractive option to many borrowers.
Carla Blair-Gamblian, a home loan consultant for Veterans United Home Loans in Columbia, Missouri, says that FHA loans will always have a place in the market whether their costs rise or fall.
"Not everyone can qualify for a conventional loan, so comparing [conforming loans] to FHA loans across the board may not yield the best picture of what loan product is best," she says.
"In an environment of rising interest rates, [an assumable loan] can give sellers an advantage over their neighbors," says Dan Green, a loan officer in Cincinnati and author of The Mortgage While buyers will have to meet all the typical mortgage requirements, they may need a much larger down payment depending on the seller's equity.
If the original mortgage balance was 0,000 and the buyer assumes the loan at a balance of 0,000, the buyer must come up with ,000 in cash to reach the original balance.
"The only negative of an FHA loan is its cost," says Pascarella.
With conventional mortgage loans, borrowers don’t have to pay for private mortgage insurance if they come up with a 20 percent down payment.He says that not many lenders will approve any loan, conforming or FHA, for borrowers with credit scores under 620.