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FHA vs Conventional loan

I have plenty of money now to finance a FHA loan in the price range that I am hoping to buy in, as well as money for closing costs and repairs. It would take about 3+ years to come up with 20% to put towards a conventional loan and have an emergency fund. This would probably be Ideal as I would not have to pay mortgage insurance for the life of the loan but I am worried that if I wait 3+ years I would miss out on taking advantage of the suffering market and lower interest rates. What are your thoughts?
  • December 08 2012 - Holiday Park
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Answers (11)

Do you have a housing payment now?  If you do, would you rather have your payment go towards rent or something you own?

Should you buy now or wait is a question that can only be answered by you.  When I bought my first house, I did not make much money, but I had a Loan Officer do a payment analysis.  It made sense for me to buy a home because my payment was about the same as I was paying for rent.

Compare payments between FHA, Conventional and/or USDA.  If it makes sense...

  • February 17
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FHA loans just got much better! (Jan 2015)
With the lowering of PMI to .85% there are many cases where FHA is a better option than 5% conventional now.
Based on the credit score of the client MI factor on Conventional loans can go as high as 1.48%

It's always best to talk to a knowledgable lender about your specfic scenario
  • February 16
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Hello there,

My best advice would be to go with what makes you happy. If it's the perfect house, at the perfect price, but you just need an FHA loan to make it happen, I would go with it, so long as you are comfortable with the monthly payment after MIP is added in. You can always refinance later on down the line once you've paid some equity into the house, and that would get rid of your mortgage insurance altogether. Hope this helps!
  • November 21 2014
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Conventional  with minmum 5% down,  if you have good credit score, That way your rate differential beween FHA and Conventional wont be much and the Private Mortgage Insurance is not permenant,  so you don't have to refi down the road to get rid of mortgage insurance

 Tom Bawany
Prospect Mortgage
NMLS # 519971
  • November 21 2014
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PMI can always be dropped by refinancing your mortgage a few years down the line when the LTV (loan-to-value) drops below 78%.
  • August 05 2014
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When it comes to low down payment options conventional loans are typically superior to FHA. Here are just a few of the differences.

  • With conventional financing you're able to place as little as 3% down. Which is actually 0.5% less than what FHA requires.
  • Conventional loans have lower mortgage insurance rates. And the mortgage insurance is removable. Where as with FHA it is for the life of the loan. Conventional also offers lender paid insurance options.
  • With FHA all condominium and planned development must be approved through HUD. And unfortunately most are no longer approved. This greatly limits your options in property. Conventional eliminates this issue.  
  • FHA also requires a rigorous appraisal inspection and review process. Conventional does not.

These are just a few of the benefits with conventional financing over FHA. Hopefully this helped answer your questions. Please contact me and we can go over all the various options together.
  • November 10 2013
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Conventional loans with low down payments are better then FHA for many reasons.  I know my company offers conventional with as little as 3% down. 
  • March 09 2013
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I think 5% down conventional fits your plans better than an FHA loan. MI as been mentioned is about half of FHA, and bigger benefit is that if you pay additional principal the MI can go away in less than 5 yrs  With seller paying closing cost as viable option in most markets, your total out of pocket could be 5% so about same as 3.5% FHA plus closing cost.
If FHA was considered, I would recommend looking at a 15 yr loan as a good option. Lower rate, much lower MI, no need to make extra principle payments, and MI goes away in about half time (min. of 5 yrs) as 30 yr FHA.
  • December 08 2012
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I suggest that you talk to a loan officer at 2 local banks.  I have recently talked to a loan officer in my area (Northeast OH).  He told me that, on the day I talked to him, a 5% down Conventional Loan with MIP was a better loan than an FHA loan.
  • December 08 2012
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One thing to think about is only coming up with 5% down and still doing a conventional loan.  If your credit is good, the mortgage insurance is almost half of what FHA is charging. Also right now mortgage insurance is not in place forthe life of the loan.  You should really sit down and talk with a mortgage professional.  See all your options and then make a good decision from there. 
  • December 08 2012
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As of now an FHA loan does not require you to pay MI for the life of the loan, it stops once you reach a loan to value of 78%. The 78% mark will take around 10 years with 3.5% down and scheduled payments, sooner if you make additional principal payments. FHA loans pay a large rate premium so using a rate of 3.25% will pay enough premium to offset the UFMIP and another 1.5 points or more to apply towards other Closing costs.   
  • December 08 2012
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