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Disadvantages of FHA Home Loans

FHA home loans provide many benefits, which, however, can be limited to a particular group of people. Due to their easier qualification requirements, FHA loans are a good option for the first time home buyers and the people with less than perfect credit. On the other hand, such loans hide some pitfalls, which you should examine in order not to fall their victim.

One of the major disadvantages of FHA home loans is the lower amounts of money they provide. This means that you may not be able to borrow as much as your home costs. FHA home loans are famous with their relative low limits as compared to other loans, depending on the classification ("high cost" or "low cost".) of the particular region in which you are.

Another thing you should know about FHA home loans is that they apply a very strict mortgage insurance policy. No matter how much equity you build on your home you will be required to pay insurance premium on your FHA home loan for several years. This means that a particular percentage will be charged up front, and a lower one for each consecutive year.

Another disadvantage of FHA home loans is that if you lack an established credit, you may not be eligible for such a loan. The application requires that you have at least some decent (not necessarily perfect) credit background. Yet, as you know, it is not very likely to get any loan (with decent terms and rates) without credit history or if you have bad credit. Thus, it is necessary to start building up your credit record.

Another drawback of FHA home loans is that you have a limited choice of options as compared to other loans.  They are conservative loans targeted toward long-term home ownership and as such they serve the needs of definite group of consumers.

Finally, despite their drawbacks, FHA home loans serve perfectly the needs of some clients. So, you should educate yourself about both their cons and pros and check whether you are one of those clients.

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