Are all FHA loans the same???

[Cody Hawkins]

As I am preparing to make the leap into real estate and purchase my first property, I know I will want to house hack a multi-family property. 

I know going with smaller local lenders like local banks and credit unions can have their advantages with more wiggle room than large multi-national banks do. However is there a big difference when doing an FHA loan because the terms are fairly standard 2.5 -5% down and closing costs 1-2%?

I would love to here everyone’s thoughts.

[Stephanie P.]

Quote from @Cody Hawkins:

Quote from @Stephanie P.:

Quote from @Cody Hawkins:

As I am preparing to make the leap into real estate and purchase my first property, I know I will want to house hack a multi-family property. 

I know going with smaller local lenders like local banks and credit unions can have their advantages with more wiggle room than large multi-national banks do. However is there a big difference when doing an FHA loan because the terms are fairly standard 2.5 -5% down and closing costs 1-2%?

I would love to here everyone’s thoughts.

If it's just an FHA loan, then the guidelines don't really differ unless the lender puts an overlay on it. For example, some lenders minimum middle credit score may be 620 or 640 while FHA doesn't care. Also, some lenders allow for a 2nd mortgage to cover the 3.5% down payment and others don't.

 Thank you Stephanie! I wasn’t aware that some banks don’t allow another mortgage to cover the down payment. What do you mean when you mention the lender putting an overlay on the loan?

Lending has inherent risk and sometimes lenders will decide that a guideline that's normal like 6 months seasoning on title on cash out refinance for example, adds too much risk, so they'll require 12 months instead. That extra 6 months, where the guideline from the lender doesn't just cover the Fannie/Freddie/FHA guideline but goes beyond it, is called an overlay. Not all banks allow for a 2nd to cover the down payment. It's actually kind of new to FHA (last 5 years or so) that I know of. Usually you have to have seasoned funds and 6 months reserves.