FHA vs Conventional Loans. Which one is better?

If you are asking the question - FHA vs Conventional Loans, which one is better? You are not alone. I was speaking at an FHA seminar for real estate agents in Fremont, CA recently. The topic was "How FHA loans are playing a big part in qualifying more First Time Home Buyers". At the end of the presentation, I was asked this question - "Are FHA loans really better than conventional". I had similar questions asked by Buyers and Real Estate agents in other forums too.

There is no black & white answer to it - because it all depends on your situation. Below, I have compiled a table to compare the loan features of both the programs. As you would see depending on your specific situation, either one could be better. ** Since I wrote this post FHA Up front Mortgage Insurance Premium (UFMIP) requirements have changed**

LOAN FEATURES

CONVENTIONAL

FHA

Max Loan Amount

$729,750

$729,750

Max LTV

90%

96.5%

UFMIP

0

1.75%

PMI

Up to .89%

Up to .55%

PMI

Only for LTVs>80%

At all LTVs

Appraisal

Via HVCC

Not via HVCC

Non occupant co-borrower

Not Allowed

Allowed

Declining Market Policy

Yes

No

Higher Rates for Condos

Yes, >75% LTV

Same as SFR

Min credit score at max LTV

680/700/720 (Based on the loan amount)

620/640 (Based on the lender)

Occupancy

All Types

Only Primary Residence

All funds can be gifted

No

Yes

Impounds

Optional <90% LTV

Always mandatory

Manufactured Housing

Limited Options

Allowed

Pre-Payment Penalty

No

No

______________________________________________________________________________________________________

Shashank Shekhar

Mortgage Broker/Banker | San Jose, CA

(408) 615-0655 | Shashank@ArcusLending.com

Ranked among Top 150 Loan Officers and Top 40 under 40 Most Influential Mortgage Professionals in the Country

Check out our 5 Star Review on Google Places and Yelp

Connect on Facebook Follow me on Twitter Watch me on YouTube 

Comment balloon 3 commentsShashank Shekhar • July 01 2009 10:44AM

Comments

Awesome information, thank you. I am asked that question also and sometime stumble. This will help.

Posted by Treva Fox-Christy (INTEGRITY REAL ESTATE) almost 10 years ago

FHA is great for first time home buyers.  Little down with lower credit score requirements.  Escrow set-up so taxes and insurance are paid every month.  You can always refi to conventional later on.  Great post.

Posted by Goodbye Active Rain, Out of Real Estate almost 10 years ago

Thanks for the info, but I think I'll let the loan officer and the client decide which is better for them. I know I should know more about it, but quite frankly I have more to worry about in this market.

I'll learn what I can, but let the professionals do their job.

 

Posted by Randy Cole (Keller Williams Integrity FIrst) almost 10 years ago

Participate