11 Benefits to Using A FHA Mortgage To Finance Your Phoenix Home

The purpose of this article is to articulate some of the most common benefits of utilizing a FHA loan to finance a home purchase in Phoenix.  The first bolded sentence is what many real estate professionals believe to be truth.

1. Phoenix FHA mortgage interest rates are higher than conventional. With tiered FICO pricing on conventional loans, FHA loan rates can actually be lower than conventional. The minimum FICO score required on a conforming loan before the borrower has to pay more points or a higher rate is 740. Using FHA financing, a 660 FICO score gives the buyer the same interest rate as someone with an 800 FICO score.
2. Phoenix FHA loans are more expensive for the seller than a conventional loan. While this was true before 2006, this is no longer correct with FHA loans. Prior to Mortgagee Letter 2006-04, there were substantial costs involved that the buyer was not allowed to pay. Now, the only cost the buyer cannot pay is a $75 tax service fee (fee may vary from lender to lender – AmeriFirst Financial does not have this fee). This makes a FHA loan much more attractive to Phoenix sellers.
3. Phoenix FHA loans require more paperwork. In prior years dating back to 2000 and before, FHA loans required much more paperwork and documentation than conventional loans. Now, there are only about seven additional application documents, when compared to a conventional home loan, which a buyer needs to sign.
4. Mortgage Insurance cannot be removed on a FHA loan. When a homebuyer obtains a 15-year fixed FHA loan with 10% down payment, FHA requires NO mortgage insurance (MI). However, if MI is obtained, it must be held for at least 60 months.
5. Phoenix FHA loans take too long to close. Today’s conventional loans have many of the same fraud detection requirements similar to FHA.  Most banks require 4506-T’s for all borrowers, a verification of deposit and employment, and Social Security verification through Rapid Reporting.  In house underwriting makes closing a FHA loan fast and efficient. David and his team can process FHA home mortgage loans in less than 30 days, and sometimes in little as 12 days.
6. Phoenix FHA loans don’t benefit the buyer. FHA is the only loan with less than 5% down (3.5% down payment) in Arizona. MI is reasonable when compared to lower down payment conventional loans. Underwriting requirements are less strict on debt to income ratios and reserves.  Buyers can also use non-occupying coborrowers to help qualify, as long as they are relatives.  All of these things benefit buyers. There are VA, USDA and HomePath home loans that offer a lower down payment, but those are only applicable to Veterans and property specific homes.
7. You need money to close as a buyer. All down payment and closing cost funds can be gifted by an acceptable source. The buyer can actually close without having any of their own money into the purchase.
8. Phoenix FHA loans don’t benefit the seller. This is probably the most significant myth still active in today’s market. In truth, a 3.5% down payment with less than perfect credit and minimal cash reserves is a HUGE benefit to sellers in Phoenix.  
9. Conventional Financing is better than a FHA loan. In today’s market, conventional loans are much harder to close and the MI is more difficult to obtain. In my opinion, FHA is the best loan out there today for a buyer with a low down payment.
10. Buyers don’t understand FHA loans. It is very easy for even the most unsophisticated person to understand the numerous benefits of FHA. In years of the past, it is true that some FHA calculations were complex. This is no longer reality.
11. The Government gets involved in the FHA loan process. AmeriFirst Financinal, and many other mortgage bankers, control the entire process from application to funding.  AmeriFirst can complete the transaction quickly and meet timelines with zero interference from the Government.