FHA HOME LOANS?

I live in Michigan. Can any one discuss it me the diff. in between FHA loans & conv. loans & who would good from an FHA loan over a conv. loan?

{ 6 comments }

BirdogsID February 15, 2014 at 1:19 pm

Conventional loans typically require more down payment. If you do not put 20% down on the home, you will have to pay mortgage insurance. Depending on how much you put down the factor will vary.

FHA loan is best for people who can only put 3% down. The mortgage insurance (MIP) monthly is going to be about 1/2 of what you would pay monthly with a conventional loan. Of course, in most cases you will also have an “Up Front Mortgage Insurance Premium” to pay at closing, which is about 1.5-2% of the loan amount. FHA is also a little more lenient on certain credit issues.

Carolinahomerates.com February 15, 2014 at 2:07 pm

If you have a low credit score …less than 620….and have little money down..you should go with FHA.

Conventionals are good for 620+ credit scores and 5% down.
FHA only requires 2.25% down payment…and you can have a real low score, and still get 7% or less on a 30yr fixed.

1st time home buyers benefit from FHA…and those who are in adjusting ARMs.

Conventional can give you the best rates…but you will need a larger down payment or more equity in the home.

alcaholicdemon February 15, 2014 at 2:47 pm

fha loans you never can pay off,and a conv.loan is sit up on a certain yearly pay off either 15,20 or 30 years.i would stay away from a fha loan,if you ever re-nig on your loan you can never get your credit back on trac for 20 years.i had lots of trouble with our fha loan and i even sighned it back over to the government,i couldnt never ever get another loan for a home because of them.beware

matzael February 15, 2014 at 2:59 pm

Well there’s a lot of differences. The main ones are:
1. FHA is more forgiving of past credit problems than conventional loans are. It has no minimum credit score requirements.
2. FHA allows you a bit higher debt ratio to qualify. This is the percentage of your income that goes to pay your mortgage and other debts every month.
3. The mortgage insurance that you pay to cover the lender in case you default is figured differently. FHA charges 1.5% upfront and then .5% monthly for everyone, regardless of the details of the loan. Conventional loans vary based on your credit score, the type of loan, the equity you have, and what you’re using the money for.
Who benefits?
1. Anyone who has poor credit or more debt than conventional loans allow.
2. Anyone who would have cheaper mortgage insurance using FHA’s method of calculating than the conventional (typically borrower’s with little equity, or those from number 1 above)

marxistharpist February 15, 2014 at 3:56 pm

FHA loans are advantageous to people with previous credit problems (they do loans down to a 500 score), who wouldn’t get approved normally. They have to be full documentation and they look more closely at compensating factors. As it is right now, the most you can borrow for an FHA loan is 362000, but it varies county to county (I have seen as low as 252000). A conventional mortgage, has a cap at 417000. The appraisal is cheaper than an FHA appraisal and the loan takes less time to get done. The other major difference here, is that an FHA loan has to be owner occupied. A conforming mortgage can be a siva, sisa, and it can be non owner occupied (Investment or second home). I hoped this helped.

Quicken Loans February 15, 2014 at 4:24 pm

FHA loans are insured by the FHA (Federal Housing Administration) and are primarily good for folks with lower credit scores and/or lower income (but income is not a main factor). FHA loans are very popular with first-time home buyers because they require a small down payment. Also, FHA allows for refinancing with only 3% equity in the home or a cash-out refinance up to 95% (almost impossible to find with a convential mortgage in today’s market).

FHA payments can be a bit higher than conventional mortgages because there is a .5% insurance premium added to each months payment (plus 1.5% of the entire loan amount is paid up front as an insurance fee or added to the cost of the loan).

Here are some basic facts about the differences between FHA and conventional mortgages:

*FHA requires around a 3% down payment. Conventional requires 20% or the buyer will have to have PMI (private mortgage insurance) or get a second loan to cover the 20%,

*FHA allows refinancing with only 3% equity in a home. Most conventionals won’t allow this in today’s market.

*FHA allows cash-out refinance up to 95%. Again, it’s tough to find a conventional that would allow that much cash out so it may be the choice for someone wanting to consolidate debt.

*FHA has an upfront insurance premium of 1.5% and .5% each month added. Convention loans only require insurance if less than 20% is put down.

*FHA allows very low credit scores. Good luck getting a conventional will less than 600 today. It can happen, but it’s not easy.

That pretty much sums it up. Good luck with your mortgage search!

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