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Is it better to have an FHA or Conventional Loan?

I have been approved for $200,000 for a home. I found one I liked for $217,000. I have 50,000 for a down payment. To be able to purchase the home at $217,000 my lender said I needed $3000 more down. I put in an offer for the $217,000 and I would pay all closing costs. Someone with an FHA loan made an offer higher than what the seller asked for. If they have an FHA Loan it's because they don't have much money. So I loose out and I have money. Should I get an FHA loan instead?
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April 06 2012 - Ontario
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Answers (2)

Profile picture for B Mike West
As Sean said, it was probably not the kind of loan, but the purchase price that made the difference. 

As a rule, most buyers and Realtors would prefer to see an offer with a conventional loan attached than with an FHA loan--IF the offer prices are the same.  With a conventional loan a buyer/borrower has to put more down and sellers tend to interpret that has the buyer having more "skin in the game."   However, as you have experienced, most sellers usually go for the bucks, not the type of loan.
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April 06 2012
No.  FHA is not better than conventional.  In this case it just came down to who offered more money.  

There are more variables in this equation however.  WIth FHA you put less down 3.5% for the loan + costs so you would have more in the bank.  You would have to pay insurance on the FHA loan and you will not have to pay insurance.

You have to decide what program will work best for you!  The seller is most often going to accept the offer that is higher which is best for them.

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April 06 2012
 
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