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FHA vs. Conventional

I was a little confused after seeing my loan officer for getting approved for a home loan.  She did the calculations for an FHA loan vs. a conventional and FHA came out to be considerably more per month.
This does not make sense.  Isn't the purpose of an FHA loan to help families and individuals with low income?
I understand that the PMI rules have changed(which is ridiculous) but why would anyone want a FHA loan?
On a 90,000 loan with 3.5% down FHA's PMI came out to $92 per month for the life of the loan.  I don't get it.
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May 29 2013 - Kamm's Corner
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Answers (3)

Profile picture for Becca72
I agree!
We have high credit scores, but we went with a 5% down conventional.  Our PMI is $107/month for a 220,000 loan.  Plus we might be able to get rid of it in a year or 2.  I went into my first time home purchase with the same idea though "FHA is for fist time homebuyers so must be a good deal"  I can't believe they never will let the mortgage insurance go!
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May 29 2013
you are correct.  Only real advantage to go with FHA is the lower credit score requirements and they will approve higher debt to income ratios.
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May 29 2013
Fha has lower credit score requirements, so the combination low down payment and lower credit score borrowers is who fha makes sense for and is used by. Fha was designed for low down payment borrows originally, it has generally had fairly similar debt to income requirements, so it not for low income borrowers. Your discovery is correct about your comparison. Fha's drastic mi increase was done to price themselves out of the market because it had been overused in the past 5 years and was hit hard with high foreclosure rates that fha could not afford to handle.
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May 29 2013
 
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FHA vs. Conventional
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May 29 2013 | 3 answers
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