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

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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) over 9 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 over 9 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) over 9 years ago

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