QandAs: Loans

What are the cons of an FHA mortgage?

Answer:
While there are many benefits of FHA insured mortgages, there are disadvantages to these types of loans as well.

First, there are limits to the amount of money you may borrow through the FHA loan program. FHA loan limits vary based on the area in which the home is located, and change on a regular basis. Additionally, the FHA places a restriction on the percentage of your income that can be required to cover your mortgage payment.

Another disadvantage of an FHA loan is the required mortgage insurance premium (MIP). A 1.5 percent MIP must be paid at the time of closing, and an additional monthly MIP fee must be submitted with each monthly payment. This is insurance premium is designed to protect the FHA against defaults. In the event a borrower defaults on an FHA loan, MIP premiums are used to pay off the loan.


	more Q&A sessions like this
	What is a Federal Housing Administration or FHA Mortgage? What are the benefits of an FHA mortgage? What are the main parts of a Mortgage? What is an 80/20 Mortgage? What is a Private Mortgage Insurance or PMI? What is a second mortgage? What does HELOC stand for? What are the benefits of a fixed rate mortgage? What is a Home Equity Line of Credit or HELOC? What is a VA Mortgage? What is Mortgage Insurance?