The Pros and Cons of FHA Loans


If you’ve ever dreamed of owning a home but felt like achieving that goal was just out of reach, an FHA loan just might be what you need. FHA loans are specifically geared toward helping first-time buyers get into the real estate market, close on a home, and start building equity in a property of their own. It’s a great option for so many Americans—we have closed many of these loans and helped our clients get into homes. In fact, The Scotsman Guide ranked the Potempa Team the #1 FHA Lender in America for the second year in a row!

However, like most things in life, FHA loans have a few pros and cons attached, which we’ll dive into in this blog.

Pros of Choosing an FHA Loan to Finance Your First Home Purchase

Low Down Payment: One of the biggest perks of FHA loans is the low down payment requirement. Instead of having to put 20% down on the house, you can get the keys to your kingdom with just 3.5% down!

Flexible Qualification: Unlike some other loan options, FHA loans are a bit more accessible for people who don’t fit the traditional mortgage mold. Whether that’s a great but not amazing credit score, some gaps in your employment, or a shorter credit history, the FHA loan is there to open the door to homeownership, and that means less stringent criteria. That said, you still have to qualify for an FHA Loan. Be sure to read our blog with tips on how to ensure you get pre-approved to buy a home.

Fixed Interest Rate: The FHA loan is a fixed-rate loan, which means you’ll never be caught off guard by your mortgage interest rate suddenly adjusting upward and making your payments too expensive for your budget. When you get an FHA loan, you’ll know exactly what to expect with no surprises.

Cons of Choosing an FHA Loan to Finance Your First Home Purchase

Private Mortgage Insurance (PMI): Earlier, we said that one of the biggest perks of the FHA loan is the low down payment requirement. However, that perk comes with a small cost in the form of PMI—private mortgage insurance. This fee is your lender’s insurance policy for agreeing to take a larger-than-average risk on you, the first-time home buyer. However, you don’t have to pay PMI forever. Once you’ve amassed 20% equity in your property, you can refinance to remove it. In some parts of the country where home prices are rising rapidly, this might happen quicker than you think!

Property Restrictions: Not every property is FHA-approved. As you shop for homes, you’ll want to work with your real estate agent to make sure the property meets FHA guidelines. In addition, the FHA loan requires the home to have minimum habitability, which means you usually can’t buy a total fixer with an FHA loan. Be sure to talk to your lender for more information on what’s required!

Loan Limits: You can’t buy just any home with an FHA loan. The amount you can borrow is limited. These loan limits change from year to year and vary across the country—click here to check out the 2024 loan limits in your area.


Ready to talk to a member of the Potempa Team about whether the FHA loan is right for you? Get in touch with us or click here to start the loan pre-approval process.

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