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Some of the basic issues that will separate out which program will best work for you are?
1) What is the purchase price of the home? (Certain loan limits apply for FHA, conventional or JUMBO)
2) How much money do you have available for a downpayment. (3.5% of purchase price-FHA or 5% or more possibly conventional-Depends on next question)3) What is your FICO score?-If fico score less than 660 and less than 20% down you'll need to go FHA because you can't obtain MI.
Fha is 3.5% down, conventional is usually 5% but you can do 3% down. For the 3% down you need a 41% DTI and 720 score. The mortgage insurance on the 3% down is the same as FHA but there is no funding fee like there is with FHA.You could do a split premium on the 3% down and pay 1% mortgage insurance up front and have a monthly rate of .76 vs. 1.15 for FHA and the 3% down conventional. This is essentially the same as the funding fee. Most of the time the seller pays closing costs so they would cover that anyway.FHA may be a better rate but you have a minimum requirement for keeping the mortgage insurance for at least 5 years where with conventional you can pay down principal faster and eliminate the monthly mortgage insurance at 78% LTV.If the goal is low down payment and the 3% conventional doesn't work, FHA would be better than the conventional.
Qualifying for a mortgage program is a joint effort between your lender and you. A good loan officer will look at your entire financial picture, explain the pros and cons of each program to you, then help you make an informed decision. FHA is a great program (3.50% down payment). New guidelines that are supposed to take affect in July will make getting a conventional loan more expensive if the borrower has a down payment of less than 20%. FHA's mortgage insurance premium is increasing on 4/18.Not good news for home buyers, but it is reality. Hope this helps. Remember, you are driving the train, your agent and loan officer are just helping you get to your destination in the best manner possible.
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