Good answers below, I won't repeat.

But remember once you put that 20% cash into that property it is going to be near impossible to get back out for a while. Gone are the days or 100% ltv refinances and/or equity lines up to 100% of the property value. Once that 20% goes into that property it becomes illiquid.

So if you are very comfortable saying goodbye to that 20% for a long time, conventional is probably the way to go.

Hi Chris ~

Regarding banks viewing buyers with conventional financing favorably over FHA buyers, I haven't seen it with my buyers in the Sacramento and Bay Area. I have both FHA and Conventional buyers with price ranges between $220K and $350K. They are all experiencing the same struggle getting an offer accepted. I attribute it to supply and demand and of course competition from cash buyers.

I don't agree that an FHA loan takes longer to close than Conventional financing. Both can get done in 30 days. Getting an escrow closed on time will depend on many items including the bank underwriting your loan. It's your loan officer's job to know which lender is best for you based on your loan scenario.

It's great that you have 20% to go Conventional but let's take it 2 steps further:

... do you have a qualifying FICO score of 720 or higher? To get the best conventional interest rate you will
need that.
... what is your debt-to-income ratio? Conventional has a lower DTI limit than FHA.

I suggest you have a loan officer show you a comparison of BOTH financing options so you can see clearly which one makes sense for you.

To Your Success,

Barbara

Reasons to go FHA:
1. You have a lower credit score and issues with your credit in the past (FHA more forgiving)
2. Would rather not deplete cash reserves to buy real estate and prefer a lower down payment (FHA requires only 3.5% down)
3. You need help from a co-borrower to qualify (FHA more liberal)
4. You believe rates will go lower and you want to take advantage of the streamline process to refinance an FHA loan. (cheaper faster and better than a conventioal refinance by far)
5. Your property will be owner occupied. (must be to do FHA)
6. Your downpayment is not being 100% gifted (allowed by FHA)
7. The property is in reasonable good shape.
8. The property is not being flipped (FHA will not allow recent flips to be financed)

Reasons to go conventional
1. Escape mortgage insurance (monthly and upfront)
2. Sellers prefer it over FHA and right now the market is highly competitive
3. You are buying a condo (condos must be approved with FHA and the process is about to become more difficult)
4. Your credit score is good and you have no credit issues.
5. The downpayment is 100% yours (not gifted from a parent)
6. Property is for investment (You will need 75% down if this is the case)

Your friend is correct and trying to buy FHA in Manteca or Lathrop is very difficult. The last 3 listings I have put on the market have all sold cash! My last 2 buyers that went into contract had conventional loans. The banks look at probablity of your closing the deal. Cash is the best probability, conventional next, then FHA and finally VA. So conventional is the best way to go for you now. This will put you in the running when there are a lot of offers for the seller to consider. The important thing is to be right on top of the new listings with a local agent that understands the neighborhoods and values in the area you are considering. Call me for help in the Manteca and Lathrop or Stockton area. I can refer you to a good Realtor in the Antioch area. - Brad Young byoung@pmz.com

Hi Chris,

With 20% down my recommendation is to go Conventional.

I can get you a free pre-approval. Please read the link below about pre-approval.

Please do not hesitate to contact me with any questions that you may have.

As an agent who represents buyers and also secures financing, I can tell you it will make a difference which way of financing you choose.

In my experience with the current market, the banks/sellers are looking for a decent return with minimum risk. Therefore, cash buyers are first to be accepted, Conventional loans second, FHA third and VA fourth. Cash is king and the market for investors and/or first-time home buyers is INTENSE!. There is low supply and high demand spurred on also by the potential ending of the government tax credit for first-time buyers.

It is not unusual in today's market, to find a decent home coming on the market getting 10-30 offers within the first few days of it's listing on the market. Banks then will ask the listing agent, "What are the cash offers"? Next, coventional etc. and work it down the line. Yes, each loan type has standards that must be met as to condition and there are rehab loans available but, the facts are that a good conventional offer will beat an FHA most of the time. A reasonable cash offer will beat both and will probably receive a counter from the bank before they move onto another offer.

If you were my client and you could afford a conventional loan with a decent down payment I would advise you to go conventional. If you can't afford it or wouldn't feel secure with a conventional you should go FHA. In today's market I would also do a few other things to make your offer uniques and stand out such as not asking for concessions and/or reducing the inspection period needed to name a couple.

Feel free to contact me with further questions you may have and good luck!

George Kininmonth
George_Kininmonth@hotmail.com

Chris,

Conventional guidelines have become even more stringent. FHA loans are quite popular for clients such as first time home buyers along with move up buyers that are buying short sales and foreclosures. FHA loans are almost similar in terms of closing time to Conventional loans. The one common trend that I see for my pre-approved clients is a case of high demand and low supply. Because of this the occurence of multiple offers are quite prevalent. Some sellers don't want to take FHA because the home may be in less than stellar condition and may require repair work. However, many are unaware of the FHA 203K which is a rehab/renovation loan.

Feel free to contact me with any further questions. Or if you would like more information on getting pre-approved.

Regards,
Shawn

I provide FHA loans for bank owned and Foreclsoure properties in Florida all the time. In addition to FHA providing 96.5% financing the seller/ bank can pay up to 6% of your closing cost. If you want to make it a strong offer go ahead and add 6% to the banks asking price and then ask them to give it back to you, so you are providing them will a full price offer. Hope that helps.

http://www.fhamortgageprograms.com/mortgage/fha-loan-program.shtml