FHA Vs. Conventional Loans – Which one is better?
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I am the author of this blog and also a top-producing Loan Officer and CEO of InstaMortgage Inc, the fastest-growing mortgage company in America. All the advice is based on my experience of helping thousands of homebuyers and homeowners. We are a mortgage company and will help you with all your mortgage needs. Unlike lead generation websites, we do not sell your information to multiple lenders or third-party companies.
FHA Loan vs Conventional Loan – which one is better? I was speaking at an FHA seminar for real estate agents in Fremont, CA recently. The topic was “How FHA loans are playing a big part in qualifying more First Time Home Buyers”. At the end of the presentation, I was asked this question – “Are FHA loans really better than conventional”. I had similar questions asked by Buyers and Real Estate agents in other forums in San Jose and rest of the San Francisco Bay Area too.
There is no black & white answer to it – because it all depends on your situation. Below, I have compiled a table to compare the loan features of both the programs. As you would see depending on your specific situation, either one could be better.
** Since I wrote this post FHA Up front Mortgage Insurance Premium (UFMIP) requirements have changed**
|
LOAN FEATURES |
CONVENTIONAL |
FHA |
|
Max Loan Amount |
$625,500 |
$729,750 |
|
Max LTV |
90%-95% |
96.5% |
|
UFMIP |
0 |
1.75% |
|
PMI |
Up to 1.05% |
Up to 1.50% |
|
PMI |
Only for LTVs>80% |
At all LTVs |
|
Appraisal |
Via HVCC |
via HVCC |
|
Non occupant co-borrower |
Not Allowed |
Allowed |
|
Declining Market Policy |
No |
No |
|
Higher Rates for Condos |
Yes, >75% LTV |
Same as SFR |
|
Min credit score at max LTV |
680/700/720 (Based on the loan amount) |
620/640 (Based on the lender) |
|
Occupancy |
All Types |
Only Primary Residence |
|
All funds can be gifted |
No |
Yes |
|
Impounds |
Optional <90% LTV |
Always mandatory |
|
Manufactured Housing |
Limited Options |
Allowed |
|
Pre-Payment Penalty |
No |
No |
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