One of the most important decisions you’ll need to make when buying a house is which type of mortgage to use. There are many options out there, and the one you choose will impact your finances for.
For most mortgage borrowers, there are three major loan types: conventional, FHA and VA. Each loan type comes with a different set of qualifications, benefits and drawbacks.
· FHA loans, specifically, are a little different than conventional loans but may be more suitable for your needs depending upon your financial situation. An FHA loan can be ideal for someone who is purchasing a first home and has little in the way of equity or savings.
Unlike FHA loans, which require mortgage insurance to be paid regardless of how much money is used for a down payment, conventional loans do not require PMI with a 20%+ down payment. PMI is also less expensive on a conventional loan than FHA loans. FHA MIP fee is between .80% and 1.00% depending on how much you put down and the amount of the loan.
For conventional mortgages, it typically stretches from around 10% to 20% of the home’s purchase price. For subprime mortgages, that rate typically goes up to around 30%. So if you landed a subprime.
· A 15-year FHA loan with 22% down payment gets you out of paying PMI, which can actually make the fha loan cheaper than a conventional. When we bought our house in 2012, the best FHA loan was a 2.75% 15-year fixed (no PMI with 22% down), but the best conventional was over 3% for a 15-year fixed.
Qualifying For Fha This is the prudent way to figure out how much house you can afford with an FHA loan, or any other type of mortgage for that matter. What Else Do I Need to Get Approved for an FHA loan? Sufficient income is one of the most important things a person needs to get approved for an FHA loan.Fha Ltv Guidelines
FHA vs. conventional: vital statistics To put the head-to-head comparison in perspective, the following is a summary of some of the key attributes of FHA and conventional mortgages. FHA vs Conventional Loans Comparison
This video discusses the difference between FHA and Conventional Loans.. You can view more videos about Programs on consumer knowledge series.
The FHA 203(k) program only requires 3.5% down, versus 5% down for the comparable conventional homestyle renovation. Conventional loans can be removed when the LTV (Loan-to-Value) reaches 78% – either by payments or appreciation. FHA offers more leniency in approval and pricing if your credit is less-than perfect.