What is an FHA loan? Nothing more than a conventional mortgage insured by HUD. The interest rates for this program are equal to the rates any "A" credit borrower would receive on a like kind program, and in some instances, they can actually be lower.
Everyone in the finance industy, including consultants, owes it to every home buyer to fully disclose all the facts and alternatives that help homebuyers avoid home loans that charge excessively high market rates!
Poor credit means higher risk home buyers need better education, preparation and tools to buy their first home the right way, the first time. Not resignation and acceptance of interest rates that increase their risk of default and potentially compound credit problems.
What every homebuyer should understand is there are risks and benefits with every mortgage product on the market, from the sub-prime market, the FHA Loan product to the True No Documentation mortgage. Each has its place in helping prospective home buyers become home owners.
Each of these programs is designed to meet the needs of a niche clientele. "Specialty Programs" have special pricing because in reality, it means you as the borrower are either hiding something, need extensive credit exceptions in underwriting, or are unable to provide the full documentation needed for standard loan programs.
This entails a higher risk to the investor and thus a higher rate of interest, regardless of your credit score. However, it is important to note that credit score does play a big role in determining just how much of a rate penalty you receive on these specialty products.
Frankly, you could do a risk reward analysis, and "how to", for every type of mortgage product, including finance options with down payment assistance, and for everyone of them there will be winners and losers. The losers usually occur, more often than not, with bad counsel!
So how can you know when you are falling victim to bad advise? Start by recognizing that you are unique. Because you are unique, your situation requires specific answers to specific questions that relate to your specific needs. In order for any homebuyer to get answers, they must know the right questions to ask relevant to their situation. "Shop for a rate" simply doesn't cut it and cheats you, the homebuyer, out of valuable information that could save you thousands by selecting a mortgage product that fits your life style.
Home Buyer Education:
Protecting Your Credit
DOWN PAYMENT SOLUTIONS™
Other Important Links for down payment assistance and first time home buyers:
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