While an FHA loan may be a lifesaver before you apply if you want to buy a home and have limited cash on hand or a not-so-great credit score, these loans do have some drawbacks you should be aware of.
- Really appraisal that is strict. The U.S. Department of Housing and Urban Development (HUD) has stringent home appraisal criteria that exclude numerous properties from FHA loan eligibility. The house even offers to end up being your main or major residence, so that you can not utilize it as a good investment home (though FHA loans may be used for some multi-unit properties up to four devices). Mobile phone homes along with other dwellings that are prefabricated qualify, however, many condominiums are not able to.
- Mandatory home loan insurance coverage. Borrowers with reduced credit ratings are statistically very likely to miss payments or standard on the loans than people with higher credit scores, so lenders need FHA borrowers to cover home loan insurance coverage to mitigate the chance.