FHA Limit Question?

[Hooosier]

We are planning on purchasing our next home next spring (2015) and have a question about FHA.  We are self-employed with net income of ~140K annually.  Both of our credit scores are in the 760-800 range and would like to purchase a home in the 425K range.

On the HUD website it is showing a "one-family" limit of $271,050 for Hendricks County, Indiana.  Does this mean we would not be able to get an FHA loan for a house in 425K range as we are planning for or am I misunderstanding?  Would this mean we would have to go the conventional loan route?

[ShanetheMortgageMan]

That is the FHA loan limit, so you can buy a $425k home but you'd have to put down $153,950.

With your credit scores if you have 5% down conventional would be a much better option - lower overall payment.

Was there any specific reason you were considering FHA financing over conventional?

[Hooosier]

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@ShanetheMortgageMan wrote:

Was there any specific reason you were considering FHA financing over conventional?

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Not really - I am just starting to look into mortgage qualification and was just under the impression FHA would be the way to go.  Forgive my ignorance, but what would make conventional better?  Are interest rates better?

With our scores and income of around 140K what do you think the MAX we could be approved for a mortgage?  We want to keep it around 425K but I'm just wondering what we could be approved for?  We have monthly debts of right around 1.1K (auto loan and student loans).

[juggalo9er]

that ackward moment when your in an online forum and someone in the same county posts a message...plainfield

[Hooosier]

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@juggalo9er wrote:

that ackward moment when your in an online forum and someone in the same county posts a message...plainfield

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Brownsburg

[juggalo9er]

howdy neighbor was just up there today...a few times

[BrianB_The_Loan_Professor]

Conventional will help you in a couple of ways - First the loan limits is $417k so you will be able to buy in your range

second the Mortgage insurance is both less and not for the life of the loan (also FHA has a 1.75 upfront MIP)

FHA is not based on scores as much as conventional but your scores are about as good as they get so you should get the best pricing available

Conventional does require 5% down where FHA is only 3.5% 

FHA is a great program and allows a lot of people to get into homes

these days though conventional is the better program mainly because of the mortgage insurance

Hope that helps

Brian

[ShanetheMortgageMan]

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@Hooosier wrote:

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@ShanetheMortgageMan wrote:

Was there any specific reason you were considering FHA financing over conventional?

---

Not really - I am just starting to look into mortgage qualification and was just under the impression FHA would be the way to go.  Forgive my ignorance, but what would make conventional better?  Are interest rates better?

With our scores and income of around 140K what do you think the MAX we could be approved for a mortgage?  We want to keep it around 425K but I'm just wondering what we could be approved for?  We have monthly debts of right around 1.1K (auto loan and student loans).

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From the numbers you provided your debt ratio should be fine for a $425k sales price with 5% down using conventional financing.  Depending on how much property taxes run you'd probably cap out at around a $575-650k sales price price with 10% down.

Interest rates are actually higher on conventional financing than FHA financing, but like Brian mentioned FHA has a 1.75% upfront mortgage insurance premium (which conventional doesn't have) and also has a 1.30% annual mortgage insurance premium (if down payment is 5%+ & loan term is >15 years) whereas with your FICO score and 5% down conventional would have .54% (for a 760+ score).  Conventional has some other mortgage insurance options like paying an upfront premium in lieu of having the annual amount.  Conventional is a little easier going on the property condition as well.

[J_G]

If you go FHA you will have a extra $400 + monthly insurance payment on top of your mortgage for the life off the loan. Conventional you will not! That is the big difference between them

[Hooosier]

Thank you all for the help!  So conventional is definitely the way to do.

I was looking at 30 year vs. 15 year loans it looks like with a 15 year we could save somewhere in the neighborhood of 250-300K over the life of the loan (is this correct?).  Other than the different debt to income, are 15 year loans any harder to qualify for?