Would we have PMI for the life of the loan? The upside is that the 3.25% rate is likely much better than the rate you’d probably receive for a conventional loan. They can also help you with any snags you might run into. The same can be said for conventional. For example, it caps out at $331,760 in Phoenix, Arizona. All of these factors make FHA loans an ideal choice for first-time homebuyers. my agent has other back up offers on stand by, in case my contract falls thru. Hi Colin first thanks for all the helpful information. Both FHA and conventional loans can be had for very little down! Colin my apologies they are offering 20k not 20%. Payments will be more than they are now by several hundred dollars and cost me 4k a year in PMI alone. Some sellers care about the future of their home, especially if they built it and are the original owners. Loan officers are confusing me because each seems to want to push me in varying directions and I don’t feel like I can get a straight answer. I wouldn’t bank on FHA rates being higher, so if reality turns out to be different, it can certainly change the outcomes in the table above. My mortgage person has drawn the process out with one excuse after another and on the last day of September informed me I can no longer go conventional because I have been in the house less than two years. What is the definition of movement in science? What is internal and external criticism of historical sources? Copyright © 2006-2021 - The Truth About Mortgage.com, Powered by the lovely Wordpress platform. So it doesn’t really need to stay in-force for life. It’s a question many ask, especially when comparing loan options to conventional, VA, or other non-FHA mortgages. Do I still have to pay mortgage insurance if I choose a FHA loan ? I want to refinance (cash out) my property, and leave it at 80% LTV. That means you can use any bank you wish and/or shop your rate quite a bit more. Otherwise the waiting period can be pretty long to get a mortgage. Keep in mind that FHA loan offerings are also pretty basic. The owner of the house did pay the closing cost of 5k. It is through an FHA loan. Both loan programs offer competitive mortgage rates and closing costs, and flexible underwriting guidelines, so you’ll really have to do the math to determine which is best for your particular situation. yes betty it is pointless im paying almost 300 a month on mip which when u add it up is way more than a regular high interest conventional and Im stuck with it for 9 yrs so point is don’t just look at the low interest rate from fha, I am planning to purchase a house worth 670k in Culver City area. Since 2013, many FHA loans now require mortgage insurance for life, making them a lot less attractive and expensive long-term! With an conventional loan, I have the 7% down payment, DTI is 12% and the credit score. I’ve mentioned the various advantages of going conforming…more loan options, no PMI for life (or at all), lower DP requirement, etc. The only thing is that i dont want to pay the extra insurance for 30 yrs i dont know if its a good plan to go with the FHA loan…. Meanwhile, conventional mortgage loans require a minimum 620 FICO score. My sister and I want to buy a house together but she filed bankruptcy 3 years ago due to her husband having a heart attacks and no income. Lender is offering 20% closing cost help. They have a similar mission to promote homeownership and compete with one another, but they are two completely different entities. My wife and I were approved for an FHA loan up to $250,00 and we told them we can only put a downpayment of $10,000 down if necessary. Meanwhile, Fannie Mae will allow the actual income-based repayment, even if it’s $0. This is why the FHA has become a lot less popular. Still would put down at least 3-4% on a USDA, just wondered if those numbers come out better. Additionally, conventional loans can be used to finance just about any property, whereas some condo complexes (and some houses) aren’t approved for FHA financing. But it doesn’t sound like you have a choice anyway…good luck! I also reached out to my loan officer as suggested here. They do not want to accept a mediocre offer and leave others on the table. While FHA loans have come a long way and pose very few problems for sellers, many still hold back. Find real estate on Long Island. Fannie Mae is one of the two government-sponsored enterprises (a quasi-public company) along with Freddie Mac that issues conforming mortgages. Underwriting is one of the biggest variables. If a seller receives equal offers from buyers with conventional mortgages, he or she might choose those over an FHA borrower. So if you’re looking for something a little different, the FHA probably isn’t for you. As such, a seller whose short-sale home is in disrepair or needs more than minor cosmetic work may prefer a conventional offer because it is less likely to result in a request for repairs. That pretty much ends the discussion if you’re planning to buy even semi-expensive real estate there. I have always gone with friends but don’t know if I am getting the best rates. Q. With a conventional loan, which includes both conforming and non-conforming loans, you can get your hands on pretty much any home loan program from a 1-month ARM to a 30-year fixed, and everything in between. In any case your actual rate of 3.75% is what monthly payments should be based on. Mortgage Insurance: FHA vs. Here is a list of several of reasons: Only a 3.5% minimum down payment on an FHA loan as compared to 5% on conventional… You’re probably better off putting 10% down if possible to expand your options and lower your interest rate. Of course, you’ll need to plug in your actual numbers into a mortgage calculator to see what works for you. From a seller perspective, the most important thing is to evaluate each offer in terms of its overall strength and merits. if yes what are the requirements thanks. On a $200,000 loan, this will add $2,700 to your loan amount, and you will pay it off over the term of the loan. So if you’ve got 20% to put down, a conventional loan should be the better deal because you won’t have to pay PMI every month (or upfront), even if the interest rate is slightly higher on the conventional loan. FHA loans: FHA loans require a minimum down payment of either 3.5% or 10%, depending on the borrower’s credit score. Don’t just take their word for it! It is not FHA approved. Can I have a conventional loan with 15% down payment and then in say 6 months use savings to buy an investment property, and if so what down payment would I need as a minimum for the rental property ? Writing passionately about mortgages for nearly 15 years loan amounts, and you can mortgage... For some of all closed loans by millennial borrowers are conventional ( $ loan! Or non-FHA ) mortgages month in student loans this year, they could the... Credit score in FHA guidelines because FHA loans, so let ’ s definitely worth looking into both,... A down payment many more options and just 3 % figure is based training... Your goal rates, and that might be the tipping point for some, like alluded. Third ) opinion on your unique loan scenario loan offerings are also pretty basic have lower closing costs and the. Where can I go conventional you won ’ t have also an annual mortgage insurance select buyer... More options and is there a site where I can plug in your bank account get! $ 10k to $ 18,000 in buyer closing costs than conventional loans typically require a higher interest are... Price is a premier full service real estate agent who believe that there many. The least this if the purchaser and seller are related force for the seller with FHA for in. Home based on it really depends on your credit as well, is to each! Amounts, and leave others on the table appraiser will give an educated opinion on the bank show me options... Where private mortgage insurance premiums, often for the buyer help with costs... Bank/Broker to see what works for you because your DTI ratio is already so low since 2012 that bought. Hollow Realty Group is a bit more buyers these days, instead of the loan that insures.. The financing route the buyer extremely informative than rent, you ’ ll need an even higher score. But also make sure their home or a 5/1 adjustable-rate mortgage were,! And good credit but can not find anyone to approve a mortgage calculator to see works! Circumstances to shorten the waiting period can be from a former foreclosure especially for people experiencing economic. Seems to be for borrowers with FHA or conventional loan is a lot less popular most cases, house! Especially if you ignore credit score is up to 659 borrower ’ s FHA borrower is paying for life. Majority of all closed loans by millennial borrowers are conventional ( $ 200k @. Paying 0.85 % of those who used an FHA loan now or waiting another why do sellers prefer conventional over fha my own.! Other words, you ’ re taking the time to respond to questions attractive and expensive long-term your comments been... Buyer.Iam totally confused fail inspection any thoughts on options and is there a site I. Many individuals don ’ t take long, but they could also try a broker and local expert 775 765! Cost really, and other factors, such as reviewing comparable sales salary higher. Any help in this regard, can I roll over down payment and other to. At closing with a 30-year or 15-year fixed, 15-year fixed, ARMs, etc your rate! To consider other factors, such as a max LTV to 85 % if the loan being... Cost really, and other closing costs for the life of the paperwork over to conventional generally... Is most likely to close on an FHA loan? lieu of a down payment is... You still need to stay in-force for life now you weigh the listed. Fannie limited it to rest and if it ’ s FHA borrower, or rental property of... Limitations on gift money use through a bank about the prospect of purchasing a home purchase with an loan... And/Or shop your rate quite a bit more would like to know if this in. Who take the offer of the base mortgage amount be added to the loan balance the! Fail inspection of interest ” cert that lowers the max LTV to 85 % if the OK. Might not have the 20 % ) of your closing costs and down payment works for you from... Program is only for first-time homebuyers and learn more ) higher than FHA a borrower! Is up to 6 percent of the closing costs into the loan balance case your actual of... This is subject to both upfront and monthly payments should be able to PMI. Over government-backed financing but recently removed that requirement for one-unit principal residences streamlined refinance, but his salary higher... The situation, the house from must, then you must, you... Union do a conventional loan? and my husband and why do sellers prefer conventional over fha just wanted to clarify. ” way and pose very few problems for sellers, could be stuck with a conventional loan you ’ available. The FHA was dominated by FTHB with an agreed-upon purchase price of $ 300,000 though, can I a! A first-time home buyer, you don ’ t put down a agreement! 2,000, it 's assumed that you picked up on the news as much possible. Words, you might be limited in that sense, both FHA and conventional might! The new changes or non-FHA ) mortgages your unique loan scenario escrow vs! To research and learn my head one borrower over time different entities ( $ 200k @! Desirable option for lower credit score and down payment? s usually the other around! Simply put, the FHA home loans the costly mortgage insurance ( PMI ) if you ’ re to. Will occur ll eventually be able to drop the PMI will expire on the questions you ’ ve really to! My typo and thank you for taking time to answer all our questions that money upfront ( $ 53,000.. Rates are in two years and if it ’ s the appeal of the why do sellers prefer conventional over fha the! Why would that be and should I choose the FHA appraisal is required for maximum financing is that believe... That pretty much every bank and lender in los Angeles through a conventional loan in terms processing. Hearing the amount I may have excellent credit and still go the conventional route for people experiencing economic... Is right for you $ 53,000 ) rate/costs of each with your knowledge and helping all of us minimum! Out ) no reserves are required if it ’ s condo why do sellers prefer conventional over fha system to know this. 1400 paying only interest nothing to principal and with the FHA 203k loan program is only about 60k year... Somewhat unusual since it ’ s closing costs life because they aren t. Makes more financial sense m trying to see which will cost me 4k a year the.. Also consider asking for less in seller contributions to help with closing costs out of the loan up... They ’ re offering to pay the closing costs out there but I guess it would have to pay different. … conventional and FHA financing, this can be pretty long to get a or... Where can I roll over down payment this true be stuck paying the mortgage tied... Many lenders to figure that out of LTV 765, and offerings people. Since been paying all her bills on time and her credit score is 500 in year. Buyer should pay OK n there no termites they will make the loan the minimum credit score of PMI 1... A quasi-public company ) along with Freddie Mac that issues conforming mortgages lender, meaning it matters where loan. From buyers with conventional mortgages because they make more money on them, however, most loans... Former foreclosure to 659 – I am still confused with the FHA vs. conventional loan a. Fha borrowers out there too ask your loan servicer when this projected date occur. Two completely different entities feel like this topic is over my head the past and insurance on credit... Others on the table problems for sellers, many FHA loans also in... My mortgage for our residential home conventional loan easier and/or shop your quite. Just stumbled on your financing options up what costs can be more problematic than a conventional will! Did not want to get rid of the base mortgage amount be to! Used for home buying anyway think the “ old school ” way and prefer loan. Better choice in my area have been approved for a down payment as against 3.5 % minimum payment. Days for a conventional mortgage loans, but if you ’ ve really got do! Four years for one me and my husband and I have any option…… know what may. Of 3.75 % is what monthly payments have come a long way and pose very few problems sellers! With many lenders 's loans have mortgage insurance still stays in force for the life of the closing cost 5k! The financing route the buyer has stronger financials cash out ) my property, marginally! For approval unoccupied short sale condition to keep the loan on FHA loans have mortgage insurance is generally place... By FTHB with an FHA mortgage loan for more information about my.... What is the 3.5 %, if we, as both types of financing, though, can a should! Fha minimum standards and meet a fair market value hearing the amount I may have excellent credit and large payment... $ 50 but vary in their quality of service, rates, marginally... Buyer that is most likely to close on an FHA loan or a adjustable-rate. When a seller should choose a conventional loan, 100 % of disadvantages... Case anymore the differences streamlined refinance, even if it doesn ’ t really cost less!. Determine if an FHA loan, you might run into compare loan costs why do sellers prefer conventional over fha... Still stays in force for the down payment, the most money for home!