Profile picture for sfrew1

what type of loan is better fha or conventional. currently have a 30 yr conv & want to refi.

I currently have a 30 yr conventional, my rate id 6.5 nad balance is 223,000. want to refi to take advantage of todays lower rates. My mortgage guy is pushing an fha loan. I was just wondering which is better? i currently pay pmi due to my ltv ratio and will most likely, with todays values, have to continue. So i am just trying to figure what type of loan will be better for the future too, when i am ready to drop pmi. any opinions are appreciated.
  • December 26 2008 - Providence
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Answers (10)

There are advantages to both programs.  Without asking a few questions and getting a handle on your unique situation, it is tough to make a recomendation.  What I can say is 6.5% is too high and there is an opportunity for you to save money with both programs.  

If you feel your loan officer took the time to understand your needs and objectives, he is probably making the right recomendation.  If not, continue to ask him and us questions until you are comfortable with a program.

Good luck. 
  • January 28 2010
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Profile picture for robleo
It depends on your needs.. but generally the over all cost of a Conventional loan is lower than FHA and the rates tend to be a bit lower.  Conventional is better.
  • December 29 2008
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If you think you are going to stay in the home . . think about a low rate 15 yr FHA loan . .. at 90% LTV or less there is no monthly MI - only the one-time upfront MI that is financed into the new loan.  This may give you the best of both worlds  . . a low rate, short term and no MI..... think about it!    4.00%+ rate and get some equity growth...

  • December 26 2008
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FHA has MI for a minimum of five years and you cannot remove it until then, also, escrow is required. It's cheaper than conventional, but you have an upfront 1.75% MI charge with FHA. On conventional, the MI could possibly be removed in 1 - 3 years depending upon the value of the home.
FHA appraisals can be a little more "strict", however FHA is considered the "new subprime".

  • December 26 2008
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Tchau,

Bad Advice...How can you make a recomendation on what someone should or shouldn't do without more information.

as for 0 points and 0 closing costs...they make sense when you don't plan to stay in a mortgage very long but if you intend to keep the mortgage for awhile by choosing no points and no closing costs you are paying a higher rate over the life of the loan.  Basically you are paying closing costs until you refinance or sell the house.  With rates at historic lows I just don't get why you wouldn't want the lowest possible rate you can get. 

If you are betting rates will continue to drop you can roll the dice on no points no closing as long as you know that there are no guarantees that rates will drop.
  • December 26 2008
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Profile picture for tchau_99
FHA mortgage rate is still un-reasonable and does not make sense.

6.5% is high and you should feel the pressure since you are losing money for high interest rate.

Whichever loan type give you $0 fee and $0 closing and low interest rate (between 4% to 5%), this is one loan type you should be waiting for and only if you can wait.  Or, do the $0 fee and $0 closing at interest rate lower than 5.5% would be a good starting point since you like the immediately benefit.

Patient is the key. Make sure you can workout all of your $##### in Excel worksheet and able to convince yourself that you wanted your house and want to stay their for long while (>5 yrs).

Best of Luck!


  • December 26 2008
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We'd really have to know what your home's value is before making a recommendation. Do you have any idea at all what it is currently worth?
  • December 26 2008
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One is not better than the other.  As far as I can tell there is no such thing as the right mortgage.  Depending on your personal situation one type of mortgage may be a better fit than another but one is not always better than another.
  • December 26 2008
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What do you think your home will appraise for?
  • December 26 2008
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FHA is better if your credit score is lower or loan-to-value is higher. You can refinance to 95% with FHA. Not so with conventional and the rates may be higher. Ask your mortgage guy why he recommended FHA. If he tells you the above, then do it.
  • December 26 2008
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