Conventional Loan or FHA Loan?

Both FHA and Conventional loans offer the opportunity to refinance or buy a home at a low fixed rate but Conventional and FHA loans have a few major differences that are important to understand when deciding to apply for a mortgage

Benefits of an FHA Loan

You don't need perfect credit to qualify for FHA's low fixed rates
FHA interest rates are just as low, if not lower, than conventional loans
With an FHA loan you can buy a home with only 3.5% down
You can refinance your home up to 97.75% of the appraised value
You can cash out equity up to 85% of your homes value with a minimum 580 FICO score
FHA loans allow a co-borrower on the loan that does not live in the property
FHA loans are generally easier to qualify for than Conventional loans
FHA loans are insured by the Government

FHA Loan Drawbacks

FHA closing costs may be higher than conventional loans
FHA loans may take longer to close than a conventional loan
You are required to pay mortgage insurance on all FHA loans where as conventional loans only require this extra monthly payment if your loan to value ratio exceeds a certain amount
FHA lenders will not loan on investment properties

Conventional Loan Benefits

Conventional loans have lower closing costs than FHA loans
If your credit is excellent, you may qualify for a very low rate
Conventional lenders will loan on investment properties
Conventional loans generally take less time to close
The seller of a home may be more attracted to a buyer who is pre-qualified for a conventional loan
Conventional lenders may offer a no income check loan, FHA will not

Conventional Loan Drawbacks

Imperfections in credit may result in a higher rate or disqualification of your application
A larger down payment is usually required when buying a home
Refinancing to a low fixed rate usually requires excellent credit with a conventional loan where as FHA loans can give you a low fixed rate regardless of credit score or credit blemishes

Factors like your credit score, equity in the home (or amount of down payment if you are buying a home), property type and other factors can play a major role in choosing a conventional or FHA mortgage.

FHA Loan Update

August 2nd, 2011

FHA Loan Requirements

What will you need? Click the link below to read about FHA Loan Requirements, credit and income requirements, FHA lender guidelines and the documents that may be required by your FHA lender....

Using a Mortgage Broker?

As of April 1st, 2011, mortgage originators will no longer be allowed to collect Yield Spread Premium (YSP) - a fee charged by mortgage brokers that is normally paid for by the lender upon closing a purchase or refinance transaction. This can mean higher up front fees for [you] the consumer....

FHA Mortgage Insurance Increase

On February 14, the FHA announced a new premium for FHA single-family mortgages, increasing the annual mortgage insurance premium (MIP) by a quarter of a percentage point (.25) on all 30-year and 15-year loans.

How will this affect you? [click]

For Home Buyers

Everything you need for Buying a Home FHA

FHA loans allow you to buy a home at very affordable terms. With FHA's low down payment requirements, light qualification guidelines and competitive fixed rates, millions of American's have turned to an FHA loan for their home purchase...

More about FHA loans for buying a home

FHA Refinance

Refinancing With a FHA Loan

If you are thinking about a refinance, an FHA refinance might be the solution. FHA loans offer rates just as low as conventional loans and in many cases are easier to qualify for...