Home Buying in 48304>Question Details

Al, Home Buyer in Michigan

FHA vs. Conventional

Asked by Al, Michigan Mon Sep 15, 2008

I'm currently looking for refinancing, lender has offered FHA at a rate of 5.5%, conv. at 7%. I have high balances on three credit cards--but good credit otherwise with a score in the 660 range. Is there any reason why I shouldn't do the FHA? Lender states I qualify, and FHA shnt be a prob. Is an FHA loan on your credit a blemish in the long run, since is has typically been used for subprime bowers?

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Hi Al,
FHA seems like a great option for you. In today's market you need a 740 or greater score to qualify for the lowest conventional rates. A 660 score (as you've obviously seen) is going to cost you in terms of a higher cost or higher fees. There is no difference credit-wise, however FHA charges a 1.5% Upfront fee as well as monthly mortgage insurance regardless of the value of the home or the equity you have in it.

So technically If you want to do a true comparison of the two programs, have your lender give you a comparison of a 0 point FHA loan and a 1 1/2 point conventional loan and see which has the lowest payment (PITI).

Good luck!
1 vote Thank Flag Link Mon Sep 15, 2008
FHA is a savior for many borrowers ... especially in the last year and HUD and Congress have done a lot to help this loan structure for people in exactly your situation. Why is that? Because you have much higher odds of purchasing a home and contributing to the growth of our economy, and much less odds of defaulting given the higher rate. It's a no-brainer - get the FHA loan and send a thank you letter to your local Republican congress folks for making that an option for you. In that letter, ask for the reinstatement of the DPA (downpayment assistance programs) to help even more people going forward...

Thank you for purchasing real estate in Michigan! I hope it becomes the home you have always dreamed of.
Web Reference: http://www.DoorToDreams.com
1 vote Thank Flag Link Mon Sep 15, 2008
fha does not count against you credit wise nor is it frowned upon, bad credit borrowers cant qualify for it. the only thing you need to ask is there arecapture clause? what this is that if you sell or refinance within a certain amount fo time, they can recapture or have you pay a certain amount back to fha, much like a prepayment penalty. ask this upfront. good luck
Web Reference: http://www.ScottSellsNH.com
1 vote Thank Flag Link Mon Sep 15, 2008
Al, there is no reason why you can't use an FHA loan. Acutally our sub prime borrowers weren't using FHA loans in the recent past and that is where part of the trouble has come from. It will most definatley not be a blemish on your credit to have an FHA Loan. Go for it!
Web Reference: http://www.sonyaloose.com
1 vote Thank Flag Link Mon Sep 15, 2008
The FHA loan program was created to help increase homeownership. The FHA program makes buying a home easier and less expensive than other types of real estate mortgage home loan programs. Some highlights of the FHA loan program are:
• Minimal Down Payment and Closing Costs.
• Down payment less than 3% of Sales Price with 100% options.
• Gift for down payment and closing costs allowed.
• No reserves or required.
• FHA regulated closing costs.
• Seller can credit up to 6% of sales price towards buyers costs.
• Easier Credit Qualifying Guidelines such as:
• No minimum FICO score or credit score requirements.
• FHA will allow a home purchase 2 years after a Bankruptcy.
• FHA will allow a home purchase 3 years after a Foreclosure.
These advantages of the FHA loan program has made it one of the best options for most first time home buyers as well as move-up home buyers.
You do not have to be a first time buyer to obtain a FHA loan, anyone may use a FHA loan as long as you do not have more than one FHA insured loan at any one time.
0 votes Thank Flag Link Tue Dec 9, 2008
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