(Closed) FHA vs Conventional

posted 5 years ago in Home
Post # 3
Member
5784 posts
Bee Keeper
  • Wedding: May 2011

We briefly thought about FHA loans and I remember the fees/PMI being WAY higher. Also, qualifying can be a pain depending on your area. If you’re in an area with a strong housing market and are expecting to bid against other buyers on houses the FHA loan is going to be less appealing to the sellers.

Post # 4
Member
8461 posts
Bumble Beekeeper
  • Wedding: April 2013

@LGenz:  +1, I think we did the math and the fees were going to end up being more.  With a conventional, we didn’t need to pay a PMI, so we went that route.

Post # 5
Member
5784 posts
Bee Keeper
  • Wedding: May 2011

@housebee:  We put down less than 20% and pay PMI but it was less with a conventional loan

Post # 6
Member
8696 posts
Bumble Beekeeper
  • Wedding: September 2013

I have a FHA and I wish I had a conventional.

Post # 7
Member
197 posts
Blushing bee
  • Wedding: October 2013

My daughter and SIL just purchased a home.  They told me that the FHA loan would cost them more over the years because you have to have 22% AND 5 years of payments before PMI can be cancelled.  I belive conventional is still 20% with no minimum repayment time before it can be cancelled. 

If you have an option, conventional is always best.

 

Post # 8
Member
7312 posts
Busy Beekeeper
  • Wedding: October 2011 - Bed & Breakfast

I agree with PPs that FHA loans have more fees and more hoops to jump through than conventional loans. However, and FHA loan is useful for many situations. An FHA is good if you can only afford a 3.5% down payment, though I question the sanity of buying a house if you can only afford a 3.5% dp. And FHA loan is also good if you have a low credit score and cannot qualify for a conventional loan. And it’s good if you buy a house that needs a lot of repairs and a 203k loan is the best option for rolling those repairs into the mortgage. If you can qualify for a conventional loan, it’s probably the best option. But if you can’t, then FHA is a viable back-up option.

Post # 9
Member
2622 posts
Sugar bee
  • Wedding: November 1999

Also FHA restricts WHAT you can buy. If its a fixer upper they may not let you buy it. If its a townhouse or condo, they have to approve the complex- and they can be pretty particular sometimes.  

Post # 10
Member
3618 posts
Sugar bee
  • Wedding: November 2011

@ThreeMeers:  +1

That is why we did not go the FHA route. I have had friends who had offers accepted on homes only to find out FHA would not approve of it so they lost the home.

Post # 11
Member
286 posts
Helper bee
  • Wedding: June 2013

@Jw1724:  

We went FHA simply because we didnt have the 20% down and wouldnt for a very long time. But we didnt want to throw money away by paying rent for several years. FHA only requires 3.5% down payment and we had 2% of that paid by Grants for Grads. We understand that we will pay more in the long run but its our first home and will hopefully only be in our starter home for 8 or so years. We will go Conventional for our next home tho. It really just depends on what you can afford to put on the table at closing. Good Luck!

 

Post # 12
Member
286 posts
Helper bee
  • Wedding: June 2013

@ThreeMeers:  FHA actually has special programs called the 203k and 203b loans that are specifically for fixer uppers. We were looking at buying HUD or bank owned homes that needed repairs and we would have gone FHA if we had done that. Thankfully (for me because i didnt want to deal with the hassel) our new home is move in ready. 🙂

Post # 13
Member
2622 posts
Sugar bee
  • Wedding: November 1999

@LLRininger:  They do have those, but they are not always available to every applicant.

And it depends on what needs to be fixed. If they deem it toxic or unsafe, it may not be aprroved anyway.

and those loans don’t help with condos/townhomes either. They look at the funds available in the general fund, what they are spending the money on, the minutes of the meetings etc and make their judgement based on that. 

Post # 15
Member
2622 posts
Sugar bee
  • Wedding: November 1999

@Jw1724:  Why are they recommending that. Find out what your PMI would be if you dont put down 20% and how it would affect your payment.

Rarely does it “pay” to not put a full 20% down if you can. The money you save in PMI goes to replenishing your savings.

Also, with paying 20% downpayment you can afford more house since you are not paying PMI. IE for the same $1000 you can afford each month you dont have to allocate a large portion to PMI instead of a mortgage payment.

Post # 16
Member
2389 posts
Buzzing bee

We opted for a convential loan as well, even though we only put down 10%. Our lender ran the numbers on both a conventional and FHA loan and the conventional was cheaper for us. Even though we have to pay PMI for a while it will be a far shorter time than with an FHA.

As PP stated, I think FHA loans are great for those who can only put down a small amount. Otherwise I think conventional loans usually are the best. 

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