FHA Loans Explained - Should First Time Home Buyers Use It?

hello everyone and welcome to another real estate video this is Xavier V Dania the real estate YouTube guy here in Arizona helping you accomplish your home goals I recently made a video where I an updated version of a video where I talked about conventional versus FHA talked pros and cons of each one and just giving you a general guideline of each one everyone seemed to have liked it but I did get some comments saying oh yeah you forgot this about FHA or Xavier you forgot about this with FHA and you know made me think I've never actually made a video where I just talk about one loan program so what I'm gonna do is do a follow up to that video talking specifically that program which in this case that's FHA now I will be making one unconventional so please stay tuned for that or it'll should be already on that if you're watching this at a later day so what I would recommend you doing is go in and watch my previous video so you can get a general guideline of both loans and you can figure out which direction you want to take if the FHA is the direction you want to take you're on the right video if conventional is the right direction then go to the other one or just watch all three it's your life you can do whatever you want you don't have to listen to a guy on YouTube before I begin let me start with my general disclaimer I am NOT a loan officer I'm not a mortgage provider I'm not a mortgage loan guy I'm simply a real estate agent who's helped hundreds of houses who's helped hundreds of houses who's helped hundreds of people buy huh who's helped hundreds of homebuyers purchase houses and have a very good understanding of how everything works when it's time for you to buy I advise you to contact your local lender every state every counties different so please contact them use this as an educational tool to get you started historically houses were never this expensive you look maybe 30 40 50 years ago you'll see house prices being ten thousand twenty thousand thirty thousand dollars housing prices were relatively low the wages were pretty low as well but you know people were able to save 20% 40% 50% or even buy their houses outright as time has progressed housing has gotten a lot more expensive United States and our wages have stayed relatively low even right now with $15 an hour they're still pretty low for what house ranges are because of this home ownership was getting a little bit more a hand well this is where fh8 comes in and this is why it's very essential it helps people who are not able to just save up 20 percent or 10 percent and let's face it it's most of us that are not able to do that the chief homeownership so the government stepping in and creating this program to essentially help its citizens its residents and anyone who's willing to purchase a home being an able to do that without breaking the bank now it is marketed mostly as a first-time homebuyer program but the reality is you don't need to be a first-time homebuyer just because it happens to be utilized by a lot of first-time homebuyers doesn't mean it's just for them the rules as far as I know is for FHA you're only allowed to have one at a time and if you have one already and you want to buy another one with FHA you must make sure the FHA house is sold first or refinance it to another kind of loan before you can go FHA so FHA they make it easier for you to qualify one thing they do for starters is they don't make your downpayment 20% or 50% it's nice and easy three and a half percent that's it you get no extra bonuses for paying more on top of that they don't give you extra incentive but you do have to at least come up with that so three and half percent is gonna be your down payment for starters your credit score now I said in my previous video it ranges between 580 there's some people that go in and Flo's 560 some people are now saying what's in the mid 600's honestly in my experience it's still relatively stayed around minimum 600 I'm sure you can find a lender that can go a lot less than that but usually there's different things that they add on top of it so let's say 600 and here's the thing with FHA it's if you have a 601 credit score and someone else is buying a house at the same time you are with FHA and they're at 800 credit score you both are getting the same exact interest rate you guys are both getting the same mortgage insurance as each other FHA is truly equal at least at that time now if you look at that maybe someone bought a house few months after you did with FHA it might be different there but as far as a FHA knows this is really great for someone who might be still starting up their credit or somebody who's recovering their credit now people always think well I need to have a 750 credit score or 800 credit score to buy not sure with FHA as long as you're in the 600's you're in the game and you don't have to necessarily work on your credit to get it hired higher for you to qualify for more to qualify to get better incentives with FHA once you're in you're in as far as the job history still relatively the same you want to have at least two years of job history if you have been at the same job perfect if you've switched jobs make sure that you have at least been paid the same so what I mean by hey the same is your w2 still so let's say you were working somewhere w2 for year and a half you switched over to another job and they pay you w2 as well you'll be fine well the issues come up with is when you switch jobs and they switch the way they pay you via taxes so let's say you've been working for years w2 you switch to a new job that pays you 3 1099 now you got to wait another two years for that now what's great about FHA that I've actually gone wrong in the past when I'm correcting it now so the debt to income ratio and for those who don't know please watch the video the debt to income ratio is actually a lot more flexible with FHA I used to think it was let's more strict but really it's more flexible I think my lender just told me that you can go as high as 56% on the debt take a ratio so in laymen terms what that basically means is if you have a little more debts on your monthly payments and then to your income you're able to qualify for a little more so with conventional you're gonna qualify for a little less for FHA you're gonna qualify for a little more because they're a little bit looser on the restrictions of having your debt to income ratio at a certain amount this sounds like perfect for basically any person who's buying their first house and it usually is but the comment of this that people don't like about is the mortgage insurance so for those who don't know mortgage insurance is essentially an insurance that's being placed on a loan not to protect you but to protect the lender from you so usually in theory if depends on how high-risk you are if you're very high risk they're gonna give you the loan but they're gonna give you a lot higher mortgage insurance payment every month so we're talking maybe 200 or 300 dollars on top of your monthly payment and that's included in your monthly payment so with FHA you're automatically assumed to be high-risk now it doesn't matter if you have a much higher credit score it doesn't matter if you've never missed a payment if your FHA the government's already going to assign a label to you you're high risk so because of that gonna have mortgage insurance for your entire life the way mortgage insurance is assessed and I'm sure there's a way to figure that out but I actually honestly don't know but what I personally seen is it's usually higher so on average at least in Arizona area 200 to 400 thousand dollar price range I'm seeing it between a hundred to two hundred dollars with FHA it might be even 150 range so your mortgage insurance is permanent and it happens to be a little higher now this sucks because he imagined you're almost paying off your house and like literally yo thousands of dollars and you've gotten you're like it's year twenty nine you're an old lady or old man and you're like ready to pay it and you're still paying this mortgage insurance like they still don't trust that you're not gonna finish paying off your loan it doesn't make sense at all but they're gonna attack this on forever however right now and historically the FHA interest rate has always been really low unless you had a really great credit score with conventional the FHA interest rates usually lower than conventional because of the slow interest rate it offsets the extra money being placed on your monthly payment from the mortgage insurance so overall in my opinion in my experience I have seen FHA be a lot more flexible and lower with the monthly payment than conventional for your average first-time homebuyer this is why I recommend FHA for someone who's might be thinking short term a house that you might live it for five years maybe ten years yeah mortgage insurance is is nice for the lender but not for you the one thing conventional does right is if you don't put 20% down eventually as you live in the house your loan amount is going down and your values going up so as you put things in value into your property you change your cabinets you add a pool you make a mural of Javiera Danya in the bedroom and not the bedroom that sounds bad looks at the living room let's go with the living room then your values going up so eventually once you reach that 80/20 sweet spot a meaning you pay 20% off of the value of the property that maybe isn't that from your initial value maybe your values gone up then you drop your mortgage insurance entirely so with conventional you're working towards paying that off you're incentivized to make extra payments towards your principal your incentive to add value to your property when I say short-term I mean five ten years after that time you either sell it and go get another house and make sure your next house is conventional or you refinance that right at that point and hopefully you have enough equity to get out of it and go to convention with FHA with three and a half percent down your $300,000 pals should have a down payment of ten thousand so in theory your loan amount or when you're like signing your documents it should say like 289 five hundred right because you're putting ten thousand five hundred dollars down whatever happens with closing concept is a closing cost so your loan amount should be 289 five hundred but what happens with FHA a narrowing always freaks out is it's always like five or six thousand dollars more they're like javi are what the hell what's going on when you're at the signing table you're gonna realize that your loan amounts actually going to say like 294 or 295 well with FHA they always add a 1.75 percent upfront mortgage insurance charge on your loan and it you don't do what you do pay for it but it gets added on on your loan yeah that kind of sucks but FHA still is a solid option for those who are looking to get into homeownership remember guys your first house isn't your forever house and it shouldn't be it's just to get started you're on the road first car you buy using your dream car unless you go straight into debt or you got some money and if you got some money hit me up by my ebook if you have a higher credit score you've taken care of your life and your finances and your credit good for you go watch the conventional video but for everyone else who made mistakes like I did we're not in a well-equipped with a super high credit score at at 20 or 19 whenever we bought the house but we got into it because FHA helped us we got a great monthly payment and we wouldn't be where we are today if it wasn't for those first two FHA loans so don't feel bad if you have to go FHA just work your way out of it you know there is a way for you to pay your mortgage insurance off initially I think you pay like I don't know I talked to your lender you can put like basically it's always a mere three and a half percent of the two or three percent but honestly it's going to pay save you money on the mortgage insurance but it's gonna get disappear like maybe consider go putting it towards your principal like I don't know there's an option for you who are you thinking of but anyways guys hope this video helped you understand FHA a little more if I forgot something else gosh leave another comment below and I'll reply and I'll dependents so people can see what I forgot so you guys love telling me when I'm wrong it's ok I love you guys for everyone else out there thank you so much for watching I appreciate your time if you're looking for a real estate agent the Phoenix Arizona area my contact provision is below I also have an app home goals on the App Store or Google Play Store download it start looking at homes for only people in Arizona area by the way everyone else I have this great ebook that with some great packages attached to it that goes over the whole home buying process only 10 bucks it's down below click the link do what you got to do and I'm also starting to do a little more live streaming so I hope you guys don't mind I'm gonna be doing them here as well and also on twitch I'm thinking about maybe twitchings switch streaming some games once in a while because if you guys don't know like the game once in a while so I'm thinking about doing that just for fun nothing too serious but if you guys ever catch me on the live you can ask me any questions there and I'm here to help other than that guys listen I really appreciate your time thank you so much for watching for those who are looking for the conventional video it will be out in a few days so thank you guys have a great day [Music]

Channel: Javier Vidana

Views: 61,720

Keywords: Conventional or Fha, Fha or COnventional, First Time Home Buyer, FHA vs COnventional, COnventional Vs FHA, Buying a House, Mortgage, Loan, HOme buying, House Buying, WHich is better, pros and cons, fha financing, conventional financing, down payment assitance, dpa, down payment assistance, home in 5, phoenix, az, phoenix realtor, phoenix real estate, javier, vidana, javier vidana, Real Estate, Youtuber, Realtor

Id: 4NNJUOpv064

Length: 12min 31sec (751 seconds)

Published: Sat Jul 04 2020