Shopping for mortgages can be frustrating. Especially when comparing mortgages that don’t fall into the same box. Example : Comparing FHA loans to USDA loans are not in the same box per se. Adjustable rate mortgages would be considered in the same box. And with so many questions unanswered, especially if not asked, how does one know.
Lately I have been reading on how people sell specific mortgages, that try to compare mortgages, yet they leave out important specifics. Or attack in their comments saying that lenders make more money on a FHA loan than a conventional loan. In my opinion, there are two important issues that aren’t mentioned when reading other posts or articles that sell one mortgage program over the other.
Two important factors when comparing mortgage programs :
Profit margin – An unknown that most can assume, yet don’t know unless they sell mortgages. Even if they were once in the mortgage business 10 years ago, they can’t truly compare apples to apples. Each lender and loan officer usually has a specific profit margin, no matter what loan program they sell. Get out of your head what you hear on the streets or online, that FHA loans make more money. Yes, they could if not used in the borrowers favorite. But wait, this could be said for any type of mortgage out there. So the bottom line is that it doesn't matter what type of mortgage that I give you if my profit margin is the same across the board.
Apples to Apples – Just yesterday I read why FHA loans aren’t as good as USDA loans, and the main point was because FHA just raised its monthly mortgage insurance. You can make all the comparisons that you would want. But two things that were not mentioned, that USDA loans are area specific and income specific. Just like VA loans, to where you have to be a veteran. Don’t get me wrong, all three types of mortgages are very good, and yes, both VA loans and USDA loans would be better than a FHA loan. Why? Because you don’t have the monthly mortgage insurance that FHA loans have. Keep in mind though, one should not pick one loan over another just based on this kind of information. In my opinion, it comes down to the borrowers goals and a few other reasons. But one thing that is often left out when comparing such loans is a major fact, that USDA loans and VA loans aren’t allowed for everyone. FHA loans and conventional loans can be used for anyone that is buying a primary home or refinancing a primary home.
Conclusion : When shopping for a mortgage, one needs to be careful of how the author of that article is presenting the material. Anyone can make anything sound good in writing. One needs to know that someone talking about USDA loans might be targeting that key word for searches, and then sell you a FHA loan because you weren’t in the right area or because your income is to much. Yet it wasn't explained in the article.
Even those rumors that float around at the water cooler, most of it is based on what they heard or what happened a year ago. The mortgage industry is ever changing and still changes weekly. You need to understand this. What I write about or look for, is someone that shares both the pros and cons when comparing mortgage programs.
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