Great question Pat. I just reviewed this same topic with a client of mine. The short answer will be " it all depends on your financial goals". I think in a lot of ways Agents are acting as financial managers instead of just selling homes. After all a home will be one of the biggest, single purchase investments you will make in your life. Where is the value here; getting $3,000 off the sale of the home your purchasing, or saving you $75 a month for the next 15 years because you opted into the best loan for your situation. (obviously, you want them both!). A good mortgage broker, with input from a good agent will steer you in the right direction. There is no "right" answer,. You need to consider your credit rating, how much money you have to work with, how long you will realistically live in the home, or a worst case scenario where you need to sell soon, available mortgage products for your given time of purchase, and the time value of money. ( do I put down a lot of money on the home if I am borrowing at 5.25%, or do I keep my downpayment liquid, invest it, and generate a higher rate of return over the 5.25%)
I would agree with a previous post that FHA has an advantage right now, expecially if you are a 1st time buyer, or have not owned a home in the last 3 years. 5.25% first time money is available. The trade off is on the mortgage insurance, which will be a little higher over tthe long haul, but when you are a full point lower that conventional rates, it becomes attractive. Another advantage that is overlooked is that FHA loans are assumable with approval. Picture 15 years from now and lets speculate that our economy has seen some inflationary times and rates have stepped up. Lets just say they are 9%. If you sell your home, you can not only offer the property itself, but an assumable 5.25% loan on the balance. The new purchasers would need to find some sort of loan to fill the difference of your loan balance and asking price. ( I bet mortgage lenders have already thought this up and arewaiting for just such a scenario. After all a lot of this went on in the 70's when rates went to 17-19%) Downside to FHA, is if you hit 20% equity, you can't drop your mortgage insurance. Need to refinance. Now they offer a streamline refi, but what if rates are up. You loose your low 5.25% Conventional, you can drop pmi with a certified 80% appraisel. (all this is generally speaking since all loan products may have different qualifiers. ) There is also 5.25% conventional 1st time buyer money, so you have lots of options. It's the first quarter of 2008 and I'm working with 4 new clients who asked the same question you have. I would be more than happy to take some time with you and break this down in more detail.

Thu Mar 6 2008, 13:28

Depends on your credit score, and how much you plan to put down. If it's a small down payment (less than 5%) then FHA will be a good choice with lower mortgage insurance rates. If it's 5% down with 680 credit score...you may have a better chance with the Lender Paid PMI program

Fri Feb 22 2008, 08:21

Hey Pat!
Just came across your question. The simple answer is that I need more information but to help with the differences currently FHA is just a slight edge better right now. Only draw back is that mortgage insurance is required at all levels were 30 yr fixed does not require mortgage under 80%. Right now you have plenty of options. Let me know if I can get you some more information. Also check out my blog for rates and answers to many questions.
Good Luck
Tony Grego - Indiana Mortgage Broker

Mon Feb 18 2008, 21:23

Today Indiana Housing just dropped its rate to 5.25%. Indiana Housing is a FHA loan.
That is a great rate. It is fixed for the life of the loan. To qualify you cannot have owned a home in the past three years. Now since it is an FHA loan they will require upfront MIP (Mortgage Insurance Premium).
This is equal to 2.75% of the mortgage amount. This amount can be financed into your mortgage. They will also require monthly MIP equal to 1/2% per year of the mortgage amount for the life of the loan. These are the drawbacks of FHA loans.
If you go Conventional you will be required to put 20% down or you will have to pay (PMI) Private Mortgage Insurance until you have acquired a 20% equity position. In other words until your home has appreciated enough to where you have a 20% equity position. Once you have 20% equity you can request the lender drop the monthly PMI. This is what is nice about a conventional loan. PMI is only for short term vs MIP for life of loan on FHA. You will also want to check out the difference in the rates for Indiana Housing vs Conventional right now. The difference might be as much as a percent. So do your due diligence.
If you want help along the way don't hesitate to call. Call Terri McGavock 317-440-9830

Wed Feb 6 2008, 11:37

To prevent paying PMI (Private Mortgage Insurance), you need to put down 20%. I would recommend doing a 15 yr mortgage if you can swing the payment. It is incredible how much money you will save during that 15 yr period. Go to any mortgage calculation website and do the AMORTIZATION to see the difference. Depending on your credit, you would probably either do a traditional conforming loan, or you could go FHA (depending on the size of the loan). There is also VA loans for veterans. If you need help looking for a home or discussing your options further, we would love to help! Call 317 846-4888 or visit our website, www.GuttingGroup.com.

Wed Feb 6 2008, 10:47