Question Details

Ms. John Galt, Other/Just Looking in Central, Fresno, CA

FHA vs Conventional Loans

Asked by Ms. John Galt, Central, Fresno, CA Tue Jan 17, 2012

What the difference between FHA vs Conventional Loans

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Hi, Ms. Galt. To add to the previous answer:
- FHA's MI (mortgage insurnace) is also tax deductible, and drops off after 5 years if you do not refinance first
- FHA does not count deferred student loans against you. Conventional does.
- FHA only requires a payment agreement for judgements or liens. Conventional requires these are paid off
- FHA is an assumable mortgage. Conventional is not.
- FHA has a Rate and Term Streamline Refinance which does not require a new appraisal ( in most cases) or verification of income or assets and is typcally a 1/3 of the cost of traditional refinances.
- FHA allows for up to 6% in seller concessions. Conventional requires a minimum down payment of 10%-15% in order to get up to 6% in seller concessions.
- If home is in need of repairs or updating prior to moving in, FHA has a 203K loan that allows you to roll those costs on top of your mortgage. Unless the home is eligible for Fannie Mae Homepath, Conventional does not offer such a product.
1 vote Thank Flag Link Wed Jan 18, 2012
Generally, you have received a pretty solid overview. EXCEPT: @Rudy, No licensed (or unlicensed) mortgage professional is qualified to give definitive tax advice (something MAY or MAY NOT be tax deductible). And, secondly, the federal law that allowed for the temporary deduction of mortgage insurance was not extended by Congress before the break and therefore, at this time, is not in effect. Speculation is that Congress will reenact it; but that is merely a guess. Ms. Galt, talk to your tax professional about any tax deductibility concerning a potential home purchase.
1 vote Thank Flag Link Wed Jan 18, 2012
Hi Ms. John Galt,

In addition to what's already been said.

An FHA loan may end up with a lower interest rate than a conventional loan depending on your credit scores.
0 votes Thank Flag Link Wed Jan 18, 2012
Hi John:

Since I am not familiar with your exact situation, let me respond in general terms to your question. First, what borrows seemm to like most is that you can borrow from an FHA Approved Lender for just 3.5% down, rather than the 5-10% that most conventional lenders now require. Secondly, they may approve borrowers with lower credit scores than conventional lenders. These scores have changed periodically, so contact your local lender or the website below for additional information. You almost must take PMI insurance (an insurance policy for the bank to protect themselves from a loss by you, especially if you can no longer afford your house payments). if you put less than 20% down on either an FHA or conventional mortgage.

For all the latest, check the link below for a lot of the answers you're looking for. They even have free counseling services for borrowers, which my clienbtsd tell me, where very helpful. Hope that helps!
0 votes Thank Flag Link Tue Jan 17, 2012
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