I do not want to pay PMI though. Do you know if we would be able to qualify for a conventional or why our lender chose that option? 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. Colin, I wish you were our loan officer. A home buyer using an FHA loan can be just as strong as one who is using a conventional or VA loan to buy a house. Some even claim FHA loans are the “new subprime” due to the dubious mix of low down payment and credit score requirements, despite originally being geared toward low and moderate-income borrowers. He now says FHA is my only option and I have to escrow and carry PMI for life. However, I’m trying to see what is the best overall. If it’s cheaper to buy than rent, you might be on to something, especially if you love the home. FHA Loans Are Flexible FHA home loans aren’t just for one type of home, or for one type of buyer. There might be a tool to compare costs out there but I’m not aware of it. Do you think she’s being straightforward? And the minimum down payment requirement is lower! With FHA you probably have a weaker borrower (in most cases) because of lower credit score and/or down payment requirements, which could present more risks in terms of actually closing. Is the FHA loan possible, since we have land and want to built?? At least they recently slashed the upfront one. At the start if this comment thread in 2013 the MIP was really high on FHA loans, but are much lower now in December 2020? Again, with heartfelt thanks for providing us with your knowledge! Offerings will vary from bank to bank. In any case, shop around with a broker and local banks/lenders to see who can do what. With the FHA can the land stand for the down payment?? Our broker/lender qualify’s us for FHA of course with upfront & monthly PMI (around $260 per month) & interest at 3.375%….But we can maybe also qualify for conventional with slight higher 4.25% with no PMI for between 5 to 10% down…Which one works best? Keep in mind that FHA loan offerings are also pretty basic. My credit score is 720 and I have the 20% down. Most borrowers who use this program in 2016 will end up paying 0.85% of the loan balance. FHA loans: FHA loans require a minimum down payment of either 3.5% or 10%, depending on the borrower’s credit score. And as mentioned, scores between 500 and 579 require a higher minimum down payment of 10%. Do the math and that might help you weigh the pros and cons of taking the FHA loan now or waiting another year. How to get a mortgage with a low credit score, 10 Ways to Save Money on Your Next Mortgage, How to Reduce Closing Costs on Your Mortgage. And thank you in advance. But again, have him/her sit down and really go through the numbers to weigh the pros and cons. To qualify for an FHA loan, the appraisal must show: The roof is in good repair with no work needed for two years. In other words, you might have no choice but to go the conventional route. © AskingLot.com LTD 2021 All Rights Reserved. Why a buyer would choose an FHA loan over a conventional loan: There are several reasons a buyer would choose an FHA loan over a conventional loan. Of course, you can argue that the PMI is built into the rate when putting down less than 20%, even if it isn’t paid explicitly. A score below 580 requires a 10% down payment, which most home buyers don’t have. But do the math either way. They do not want to accept a mediocre offer and leave others on the table. We both have good credit (780s). This can make qualifying for a conventional loan easier. It’s possible that conventional rates can be .375% to .50% (or more) higher than FHA. While they do offer borrowers more flexibility, they often have higher interest rates than their conventional counterparts. I just wanted to thank you for taking the time to answer all our questions. Fannie Mae is one of the two government-sponsored enterprises (a quasi-public company) along with Freddie Mac that issues conforming mortgages. We thought we were going to have a VA loan, but they denied us. Why do sellers prefer conventional over FHA? Many sellers prefer conventional financing or any financing over FHA loans. Reasons have to pay PMI on a 30 year note % if the condo is not giving me any.. Lowered the insurance on an FHA loan? I choose the FHA instead has... Hard to narrow down insurance premiums, often for the life of property! % which why do sellers prefer conventional over fha about 6600 as a max LTV, minimum credit score. ] they that... Than conventional appraisals it sounds like they ’ re probably better off with... 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