Should I apply for for and FHA loan to purchase a home?


by Charles McShan



Hello Everyone,

This is Charles McShan with Century 21 Universal. Happy belated September to one and all. The summer of 2022 is slowly winding down in the Chicagoland area. The city was jumping with activity this summer; everyone tried putting the coronavirus pandemic in the back mirror. The housing market was also scorching hot. But as the weather cools down, so does the housing market. Deals are still being made, but some homebuyers’ credit might not be the best, and for those homebuyers, maybe they should ask the question. Should I apply for an FHA loan to purchase a home? This blog post will cover that subject.

What is an FHA loan?

A bank or mortgage company creates an FHA loan but the loan is by the Federal Government. Like a conventional mortgage loan, you must meet income and credit requirements. No maximum income requirements exist, but the loan cannot exceed $420.680.The FHA loan is not a government subsidy. While the federal government backs this type of mortgage, it is available from any private lender, and you can shop around for the lowest rates.

What are the advantages of an FHA loan?

1:The main reason for obtaining an FHA loan is the low down payment, typically around 3.5%. If your credit score is under 650, the FHA  loan will be the best way to go

2:An FHA loan will allow the borrower to submit proof of compensating factors to prove their creditworthiness. These things can be verified as cash reserves and residual income.

3: If you had past bankruptcies or foreclosures with a conventional loan, you would have to wait four years after a bankruptcy discharge with an FHA loan; it is only a two-year wait. With a regular conventional foreclosure, you must wait seven years, whereas, with an FHA loan, the waiting time is only three years.

4:Conventional loans can be stringent regarding where your extra money comes from. They insist that the funds only come from relatives or domestic partners.FHA loans are more lenient, and gift funds can come from various sources unrelated to you.

5:Some closing costs can be rolled into the loan for a little higher interest rates. That has to be your call. At one time, thru negotiations, you could have the seller pay for some of your closing costs, but not in this climate of low inventory.

6:With an FHA loan, your debt to income will be higher than a conventional mortgage, and it could be as high as 43%. Talk to your lender.

7:Here is a reason many would like. A borrower can be on the loan even though they will not live on the property. That is called a non-occupant co-borrower. In other words, a parent can help their child buy the home even though they will not live inside the house. Co-borrowers typically have to be related to the homebuyer.

8:Low-Interest rates.Need I say more, but I will because this could be a double-edged sword which I will discuss next in the disadvantages of an FHA loan.

Are there any disadvantages of an FHA loan?

There are very few disadvantages of an FHA loan. It just depends on how you look at it. For example, going back to number 8 in the last paragraph above, I said an FHA loan has the lowest interest rates around but keep this point in mind with a conventional loan, if you put less than 20% down in payment, you will have to pay PMI insurance until you acquire 20% equity of the home. Then you can have the lender remove the PMI. You cannot do that with an FHA loan. The FHA’S mortgage insurance premium, known as mortgage insurance premium or MIP, will be there for the life of the loan. There are two types of MIP fees. The first is an upfront MIP fee known as UFMIP, which equals 1.75% of the loan amount, which can be rolled into the loan along with the regular annual fee.

 These insurance premiums may upset some because there are two ways to look at this. You can say this is a rip-off because this insurance increases your mortgage payment. That is one way to look at it. The other way to look at this is that for most people with limited funds, this is the only way they could ever achieve the American dream of home ownership. The FHA insurance protects the lenders from default, and this protection allows the lenders to go out into the market and offer these loans and lend out the money. If this insurance were not available, over 8 million people would not be homeowners today. And by being a homeowner, your house is an appreciating asset, as many have found out these last few years. So it will be, for many, a blessing; for some, it might be a curse, but if you cannot qualify for a conventional loan, you have the option of going FHA.

The only real disadvantage in the Chicago area to an FHA loan is that you can not use that type of loan to purchase most condominiums for sale in our local areas. If you wish to do your research, there are plenty of stories on that subject. Specific homeowner associations do not want to let FHA into their complex because their appraisals could lower their property’s value. Also, the FHA will not approve Condo associations that are financially distressed, have more renters than owners, and there can be no questions about their hazard insurance and liability. Specific Condo associations still do not want to be on an FHA-approved list because they are not in compliance with the regulations mentioned in this paragraph. For those reasons above it is imperative that you must talk to your homeowner’s association or Condo board before you make the decision to allow a homebuyer to use an FHA loan as an option on your property. Here is a link and article dealing with this subject.. click here

How to apply for an FHA loan and the steps that lead to the closing!

Just like a conventional loan, your lender will require your state-approved I.D. social security number, income information, employment history, down payment amount, and all pertinent information on the property you wish to obtain If you are self-employed, you should bring your profit and loss statement. The next step will be turning over all your financial documents to your lender. Remember that mortgage terms can vary from one lender to the next you might want to contact multiple lenders to compare offers. Those lenders will check your credit, but as long as you submit all your mortgage loan applications within a 45 -day window, they will be reported as a single credit inquiry, so your score will not be dinged multiple times.

Keep this point in mind. Your home must be your primary residence. You cannot buy that home and live elsewhere. You must live in that home exclusively. If you purchase a multi-family home, you must live in one unit and rent out the other units.

Once the lenders submit the loan application, they must provide you with a loan estimate within three business days. Remember that an FHA loan with a 15-year term will have higher payments than one with the same amount for 30 years. Once you get this loan estimate from 3 or more lenders, you can compare the loan type, loan term, and loan amount. Then compare the interest rates, annual percentage rates, and all fees to see who will give you the best deal.

Once you choose the lender, closing on an FHA home can take 30 to 45 days. During this time, your loan is going thru the underwriting process like a conventional loan, and it is assumed that you have hired a home inspector to check the home for defects. This is very important. unlike traditional loan appraisers, appraisers for FHA have stricter guidelines, and FHA homes must meet eligibility requirements. has specific issues, so it will not be eligible for an FHA loan. Please put that thought front and center in your mind. Many homes will not pass an FHA appraisal, no matter what. If you wish to learn more, please click this link

click here

If all goes well with the inspection and the appraisal process, you are on your way to the closing, where the documents will be signed, and you will receive the keys to your new home. Yeah! Yeah! I hear you. Someone out there would like to buy an FHA home that is not in good condition. What should you do?

I would like to invest in an FHA home that needs work.

Many home buyers would like to purchase an FHA home and rehab it. If you are one of those and you would like to learn about The FHA minimum standards for a home, please click this link. click here

Also, please read this follow-up article on the same subject click here

If you have your heart set on buying a fixer-upper, you should read up on the FHA  203 K loan. Please click this link to learn more about this type of loan.   click here

Can I Refinance an FHA loan?

Should I apply for an FHA loan to purchase a home? That is the title of this blog post and also the main question. After reading this post and the additional articles, I hope you can come up with an answer. Yes, you can. In the future, you can refinance your FHA loan to lower your rate and your monthly mortgage payments. It will be faster than a conventional refinance and will require less documentation.

You can also refinance to a conventional loan in the future, and you will be able to drop that mortgage insurance premium (MIP) I talked about earlier. Your credit score must be reasonable, and you must have paid at least 20% of the home equity to qualify.


Should I apply for an FHA loan to purchase a home? That is the title of this blog post. I hope that I have given you enough valuable information so that you can make an informed decision. You must do your research and especially if the home needs significant work. For the rest of the homes for sale on the market today, you cannot go wrong if you choose this option. Speaking on the housing market. More homes are coming onto the market, and whether or not interest rates will affect home sales, only time will tell. Speaking of time, this was a good summertime for the Chicagoland area. As of this writing, the Chicago White Sox are still in the playoffs, the Chicago Cubs are not, and the Chicago Bears are 1-1  in their regular season. The parks, forest preserves, and beaches have been packed with people.

Regarding the housing market, it was also a hot summer, and while home sales have slowed somewhat, it is still an excellent time to buy or sell. If you need to purchase a home, I am here for you. If you want to go with a  conventional loan, good.! Please contact me if you like what you read here about acquiring an FHA loan. I have lenders who specialize in this type of loan. It is now time to say goodbye to the summer of 2022. The Autumn season is now upon us.\With that being the case, it is time to bring out the Fall 2022 buyer and Selling guides. Feel free to click the links below to download your copies, and you can share them with friends and family members. 7300 North Western Ave. in the West Ridge neighborhood of  Chicago is where my office is located. My name is Charles McShan with Century 21 Universal. I hope to hear from you soon. Take care and be safe out there.   









                                                                  emails   [email protected] / [email protected]

                                                                  Website click here

                                                               Facebook click here

                                                               Pinterest  click here



To obtain the 2022 buyer’s guide Fall edition. Please click here


To obtain the 2022 seller’s guide Fall edition, please click here. 





Search Categories

Related Posts