Mortgages are a huge commitment. You are making an agreement to pay for where you live for the next 15-30 years, at least. It’s a huge decision. There are also a lot of options. One of the big decisions that homeowners make is: FHA or Conventional Mortgage? Both have their advantages and disadvantages. So it’s a Mortgage Face-Off: FHA vs Conventional!
FHA Loan Advantages
- The big advantage: a lower down payment requirement of 3.5%
- You don’t need to have credit as high as in a Conventional – you can get a loan with a 500 credit score.
- The debt-to-income ratio isn’t limited to 43%
- Another borrower can “assume” your FHA Loan in case of a catastrophe.
- The FHA “Streamline” refinance allows you to quickly change your interest rate if it drops.
- You can apply in 3 years vs. 7 years for a foreclosure and 2 years vs. 4 years for a bankruptcy.
- The base interest rate will generally be lower than in a Conventional loan.
Conventional Loan Advantages
- While Mortgage insurance is required for loans exceeding 80 percent loan-to-value, mortgage insurance, or PMI, is required on all FHA loans, no matter how much you borrow.
- While you pay monthly for your FHA PMI, Conventional mortgage insurance is usually a one-time fee or a yearly premium.
- At 78 percent loan-to-value you can get rid of Conventional Mortgage Insurance
- Your credit affects your Conventional Mortgage Insurance, meaning lower rates for good credit, while FHA is a one-rate solution
- While FHA has limits determined by county, Conventional loans can cover you for far higher values
- Even if rates are higher for Conventional, your payments could be smaller sue to PMI
Call The Home Loan Expert Team in St. Louis at (314) 781-9700, Chicago at (773) 770-4727, Indianapolis at (317) 550-1515 or Nashville at (615) 810-8555. You can always apply online at www.thehomeloanexpert.com, and we’re also open on Saturdays and will come to you to help close your loan. We work hard to make it easy on you. Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?