How One Buyer Saved Money by Walking Away from an FHA Loan

Depending on factors like an individual's credit score and debt-to-income ratio, an FHA loan could best suit a client's borrowing needs.

True or False:

FHA loans are always the least expensive and best option for first-time homebuyers.

The answer is…

FALSE

There is a time and a place for an FHA loan. Depending on factors like an individual's credit score and debt-to-income ratio, an FHA loan could best suit a client's borrowing needs. Many borrowers also believe that first-time homebuyer programs with down payment assistance are a must.

But they are not always. This was the case for one borrower (William) when he came to Mindful Money wanting a mortgage with down payment assistance. There is a time and a place for down payment assistance, but in Williams's case, he had a 401 (k) where he could borrow the money from himself and not rely on the down payment assistance program.

Learn how walking away from an FHA Loan helped him save money on his monthly mortgage payment.

The Story of a First-time Homebuyer

William was referred by his realtor a few months back. His friends told him that every first-time homebuyer should use an FHA loan.

He believed FHA loans allowed clients to put the least money down.

He believed an FHA loan would have a lower monthly payment.

He believed he could only qualify for an FHA loan because he was a first-time home buyer.

He also believed pairing a down payment assistance program with the FHA loan would be ideal, allowing him to bring the least cash to the closing table.

In his financial situation, an FHA loan with down payment assistance resulted in a monthly mortgage payment that was significantly higher than what he thought it would be and, in turn, more than he was prepared to pay.

Luckily, there was a different option that would allow him to purchase his dream home!

Why William Was Encouraged To Consider a Conventional Mortgage Loan

William had great credit and the ability to bring a small down payment to the table, even though he could have qualified for down payment assistance.

Because Mindful Money takes a holistic and mindful approach to mortgage lending, they wanted him to see all the options available before deciding which one best aligned with his financial goals.

When we compared the FHA, including down payment assistance, with a three percent down conventional option, the conventional loan was the best choice for him and his goals.

His main goal was to keep his monthly payment as low as possible. Using a conventional loan, he could save $300 a month on a $200,000 house!

Getting pre-qualified is a great place to start, and it's always been challenging.

If there are any questions or if ready to get the ball rolling, contact Mindful Money at 480-313-7103.

* Specific loan program availability and requirements may vary. Please contact a mortgage advisor for more information.

Mindful Money is a lending provider servicing Arizona, California, and Colorado with mortgages of all kinds. Whether it is an initial purchase or a refinance, we help buyers secure a loan to finance the home of their dreams.