And now, the disadvantages:
- You’ll have to pay mortgage insurance premiums(MIP) for at least five years. Even if your home’s value increases to the point that you have 20% home equity, FHA mortgage insurance premiums must be paid for at least five years unless you sell your home or refinance it to a non-FHA loan.
- FHA mortgages require both upfront mortgage insurance (1.75% as of April 2012), which can be wrapped into the loan, and monthly premiums, which are added to your mortgage payment.
- FHA mortgage limits mean that you won’t be able to buy a really expensive home with FHA financing.
- FHA has some pretty strict guidelines when it comes to financing condominiums. If your development is not approved by FHA, you won’t be able to finance a unit with an FHA mortgage.
- FHA fees can be more expensive. FHA has increased its fees and mortgage premiums several times since 2007. If you have excellent credit or more the five percent home equity, it may be cheaper to finance with a community homebuyer or other conventional mortgage program.
- FHA appraisals can be more comprehensive and may cost more.