Home Buying in Natalia>Question Details

Mary Ramirez, Home Buyer in Natalia, TX

what is the diffrence between an F H A and a convational sale?Is this the only way to buy a bank owned home?who pays the closing costs? please help.

Asked by Mary Ramirez, Natalia, TX Thu Dec 30, 2010

Help the community by answering this question:


Hi Mary,

No one can dictate which lender or type of financing you use. What determines that is a borrowers creditworthiness, their income, and the amount of cash or other real assets they have.

FHA is just one of many types of loans available. That kind of loan has returned to popularity the past few years because it's harder to qualify for conventional financing.

If you have a high enough credit score, income, and down payment, there are many options other than available. The best person to consult would be a lender is you have not done so already.

Good luck.

Jack Jentzen
Prudential Starck Realtors
(224) 234-5276
0 votes Thank Flag Link Mon Jan 3, 2011
Mary, your question about FHA and Conventional, is referring to Loans. These are the two back bones of lending, FHA is federally backed loans, while conventional loans are often done "in house" for what ever bank you are working with. NOW, your question on "is this the only way to buy a bank owned home?" I think is a referance that many REO's (Real Estate Owned by Banks/lenders) often have "specials" to FHA buyers. In our market the special is, FHA financing buyers get "first pic" at home. Where they may give all FHA borrowers looking the first week to make an offer before they open the listing to all others. This is for a stabalization process, but really it is so FHA borrowers, who are often less fortunate than a convential borrower has less competition, and since the GOVT is getting the financial benifit they give themselves the upper hand. Buyers have closing costs to pay and sellers have closing costs to pay, all aspects of real estate are negotiatable even closing costs.

If you have found this to be helpful and insightful please mark it as best answer or thumbs up.
Thank you. Justin Ruzicka The House Guy
Web Reference: http://www.house-guy.com
0 votes Thank Flag Link Sun Jan 2, 2011
Hello Mary,
There are a few differences between FHA and Conventional, the biggest being when you want a home mortgage that is over 80% Loan to Value of the home. FHA charges you Mortgage Insurance because they let you go up to 96.5% Loan to Value, that means you only have to put 3.5% downpayment. FHA is a little more stringent, though not half as bad as they used to be, when it comes to the condition of the homes they will lend money on. They also charge a 1% Up front fee, called a Up Front Mortgage Insurance Premium.
Conventional mortgages requires Private Mortgage Insurance, PMI, which is where you pay a monthly fee to a company that insures the amount of the loan above 80% LTV. There is no up front fee with private mortgage insurance, but the monthly amount is usually higher and it is more difficult to qualify for.
Most properties will list what types of financing is acceptable to purchase the house with. If the bank knows there are issues with the properties that will keep it from being FHA insurable they will usually only list the options as Conventional financing or cash.
When it comes to closing costs you the buyer are responsible for them, but many purchase agreements will have where the seller makes concessions to help you pay for some or all of them. Many bank owned properties will have a set amount that the listing realtor may offer to buyers.
One other difference between FHA and Conventional Mortgages is that with an FHA mortgage the seller may cover up to 6% of the sales price towards the closing costs where with a Conventional mortgage program the seller is only allowed to contribute up to 3% of the sales price towards the sellers closing costs.
When you sit down with your mortgage professional they will be able to go in depth with both of the programs and their pros and cons for your situation.
Sean Wait
0 votes Thank Flag Link Sun Jan 2, 2011
Mary- Many times what looks like a "Bank owned " listing is actually is a listing
on properties Owned by HUD . These properties are formally Bank Owned and
Received back as part of Forclosure Insurance Settlement with the bank.
HUD is many times willing to insure a new FHA loan with special considerations.
this allows for easier finance and access. Closing costs can be had up to 3% !
A house offered in this HUD HOMES program involves bidding - with "net bid " winning.
amount asked for closing costs -reduces the "net " So don't ask for what you wouln't need.
HUD HOMES require an approved Broker to bid. In any case if you are looking into
this or REO listings a broker specializing in such can save you alot of time and money.

There are some neat "hombuyer Assistance programs in Texas too. Contact me and I'll
direct you to them. Good Luck on a Deal! hope this helps.

Bob Brubaker --Highlight Realty - West Pam Beach Fl. selling HUD HOMES - Selling HUD HOMES .- In
Palm Beach County, Fla.
0 votes Thank Flag Link Sun Jan 2, 2011
Most lenders can do conventional to 95% (5% down) with a 680 credit score.
And you can obtain financing to 80% (20% down) with a 620 score.
0 votes Thank Flag Link Thu Dec 30, 2010
Hi Mary,

FHA & Conventional are very similar in many ways. A few differences to note:
1. Persons with lower credit scores wanting to put down the minimum down payment will likely use FHA because lenders do not have to adjust the rate or charge points for 'risk based pricing'.
2. The property is more scrutinized on FHA loans.

If you are putting 20% down, then Conventional might be the best loan for you.... hard to say without seeing a full application... But this has been the case on almost every deal lately.

Well, you can ask the seller to pay some or all of them. Just remember that if you do, you are really just rolling them into the loan because if the seller wasn't paying your costs you could have negotiated a lower sales price.

Please feel free to contact me with follow up questions.

Tom Burris
Mortgage Banker
214-763-4629 cell/text/nights/weekends
0 votes Thank Flag Link Thu Dec 30, 2010
Closing costs are paid by you HOWEVER it depends on how the sales offer is structured for seller contribution which based on lender approval

FHA and converntional loans are the only 2 types of loans offered purchase a home.

Purchase a bank owned property you can pay cash the other options besides 2 listed above

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes Thank Flag Link Thu Dec 30, 2010
This refers to the type of financing you use.
FHA is government insured and typically requires a minimum of 3.5% down payment.
Conventional loans require typically 20% down payment.

In both cases both the buyer and seller will have closing costs.

Probably the best thing for you to do is get with a loan officer. Let them get you prequalified. They can then look at your cash situation and advise what is the best type of loan for you. They can also outline what the closing costs will be, what interest rate you will pay, and what your monthly payment might be.

This is really the first step in buying a home.

Good Luck.
0 votes Thank Flag Link Thu Dec 30, 2010
Bruce Lynn, Real Estate Pro in Coppell, TX
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