FHA makes home ownership a reality for the buyers. Buyers having a specific profile, may chose FHA and it can be a perfect choice for them. However, keeping aside all the benefits, FHA home loans have some drawbacks also which one should always keep in mind while opting for them.
The first drawback of FHA home loan is that, it does not allow you to borrow as much you want to borrow for your home. When we compare the borrowing amount of FHA home loans and other conforming loans, the amount of FHA home loans is quite less as compared to other one.
Secondly if you do not have any credit history, possibly, you would not be able to get the FHA home loan. They ask for the credit history, but you may ask your broker if they can allow you to get FHA home loan without the history.
FHA home loans have a very strict kind of mortgage insurance structure. You have to pay 1.5 % up front and 0.5% annually, which is paid on monthly basis. You are supposed to pay this premium for 5 years even if you have sufficient equity in your home.
The buyers who wish to have long term home ownership, are defined under the category which is specially designed for FHA home loan buyers. You may be better off without these loans as they can lead to negative amortization in which at the end of month you owe more than you did at the beginning. But however, FHA home loans are a good fit for some borrowers.