Get a quote on a conventional mortgage and FHA mortgage and remember to use the same loan amount. Then figure out what the monthly payments are on each. Calculate the difference of the monthly payments. After calculating the difference in monthly payment add the PMI amount to the FHA monthly payment and determine which mortgage payment is lower.
One more thing to remember is that FHA also charges a upfront Mortgage Insurance Premium for using FHA.
If the FHA monthly payment is lower then the conventional payment even after adding the monthly PMI then that's great. The last step is to divide it by the cost of the upfront Mortgage Insurance Fee. This will determine how many months it will take to pay back the upfront fee that FHA charges. After you determine this estimate how long you plan on living in this home and if this makes sense to achieve your goals. Most people move every 5-7 years on average.
Down payment only 3.5% of the purchase price.
Gifts from family or Grants for down payment assistance and closing costs OK!
Seller can credit buyers up to 6% of sales price towards buyers costs.
No reserves or future payments in account required.
FHA regulated closing costs.
Licensed Associate Broker
Accredited Buyer Representative
GREEN Designated Agent
William Raveis Legends Realty Group
First to best answer your question, knowing your credit score ( assuming you do) would make a big difference in which way to go as well as knowing how much cash on hand or gift money available.
FHA does have up front mortgage insurance of 1% and a monthly mi factor of 1.15% for loans over 95% loan to value and 1.10% for loans under 95% LTV. They do allow for higher debt to income ratios and are a bit more flexible with underwriting giudlines.
A Conventional mortgage can be cheaper depending on your credit score and can allow you to put down as little as a 5% downpayment. You can also buy out the monthly mortgage insurance and save a bundle of money over the life of the monthly mortgage insurance premiums. This can be paid out of pocket or with a seller credit. This is called a single premium payment mortgage insurance and is the best way to go if you qualify for it.
You were asking on another thread if paying a point makes sense, buying out the mortgage insurance premium makes most sense with the money and if you still have money leftover then find out how much money it will cost (how many points you will have to pay) and then figure out how long it will take you to recover from the cost. If it takes three- four years and you know you will stay put for a while then it is worth it. If you plan on moving up to a bigger home or not staying at the home much longer than that, it is a bad move.
I hope this helps.
-no up front MI and lower monthly MI in most cases
-stricter credit and debt ratio qualifying guidelines
-slightly higher rates than FHA
-up front MI and higher monthly MI in most cases
-slightly lower rates than conventional
-easier credit and debt ratio qualifying guidelines
-ability to go 3.5% down on 2-4 units
-allowed to get 100% down payment as a gift
-non-occupant co-borrowers allowed with 3.5% down
Which is better, an apple or an orange?
You need to sit down with a Mortgage Agent and do two sets of numbers, look at the GFE for both, and decide:
There is simply too much information needed.
Good luck and may God bless
In general, FHA lets you put 3.5% down. Conventional might allow you to put 5% down, but many loans will be at least 10% and upwards of 20%. Conventional loans have a bit better rate and less fees. It's really a numbers game and it depends on your situation. If you don't have a lot of cash, or you need money for rehab, then FHA will usually be better.
There is a chance you will also need the money to donate to Joe Lieberman's opponent, which would also favor going FHA