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FHA vs. Conventional Question

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dtjones052209
Regular Contributor

FHA vs. Conventional Question

Just out of curiosity. What makes a FHA loan vs. a Conventional loan different? I have read a recent post about FHA PMI and need some clarification on if it applies towards conventional loans.

 

Is it the requirements? 620 vs. a 640? Are the collection issues more a show stopper for conventional loans? If you have a 640 mid score are conventional loan requirements that a person pay 20% no matter what? Or if i have a 620 mid score and 20%-30% down does that pass the first stage of paper qualification?

 

Are the down payment requirements different? I have heard of lenders stating 5% down for a conventional loan. How true is that?  What are your experiences?

 

Does PMI still apply for conventional? If that is the case then why go FHA? What are the requirements for a conventional pmi?

 

With the way that the housing market is going is it worth jumping the gun or just waiting?

 

 

I know a lot of the answers to these questions are individual specific or lender relationship/requirements, but is there a method to this?



Message 1 of 4
3 REPLIES 3
BrianB_The_Loan_Professor
Valued Contributor

Re: FHA vs. Conventional Question


dtjones052209 wrote:

Just out of curiosity. What makes a FHA loan vs. a Conventional loan different? I have read a recent post about FHA PMI and need some clarification on if it applies towards conventional loans.- They are backed by different entities - each has its own guidelines and requirements

 

Is it the requirements? 620 vs. a 640? Are the collection issues more a show stopper for conventional loans? If you have a 640 mid score are conventional loan requirements that a person pay 20% no matter what? Or if i have a 620 mid score and 20%-30% down does that pass the first stage of paper qualification? see answers below as you appear to be confusing the two - 

 

Are the down payment requirements different? I have heard of lenders stating 5% down for a conventional loan. How true is that?  What are your experiences? Conv MINIMUM down is 5% FHA 3.5%

 

Does PMI still apply for conventional? If that is the case then why go FHA? What are the requirements for a conventional pmi? Yes but it is not called PMI it is just MI

 

With the way that the housing market is going is it worth jumping the gun or just waiting? hows the market in your area - in my area prices are going up and rates are going up - if you wait you may miss the boat

 

 

I know a lot of the answers to these questions are individual specific or lender relationship/requirements, but is there a method to this? see below


FHA is a Govt loan it has its own requirements but in general it is better for folks with lower credit scores or little to no down payment - it does not require that you have any reserves. Rates do not depend on credit score or lan to value - PMI is for the life of the loan and there is an upfront PMI payment that gets added to the loan amount - 

Conventional is a little tougher - they want higher scores and more down - Rate IS based on loan to value and credit score - any loan with less than 20% down wil require Mortgage Insurance - it too is based on loan to value and Credit scores - Conventional wants reserves (money left over after you fund) for emergencies - Conventional offers a one time upfront option for the MI and if you take this there is no monthly add on for MI - 
FHA ratesa are a little lower but the MIP is a little higher - 
Your best bet when applying is look at both and weigh the options - 
Hope this helps
Brian

 


 

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Brian B The Loan Professor
Mortgage Banker - offering FHA, VA, USDA , and Conventional mortgages in all 50 states -

If I do not respond to a follow up question please feel free to contact me directly
Message 2 of 4
ezdriver
Senior Contributor

Re: FHA vs. Conventional Question


@BrianB_The_Loan_Professor wrote:

@dtjones052209 wrote:

Just out of curiosity. What makes a FHA loan vs. a Conventional loan different? I have read a recent post about FHA PMI and need some clarification on if it applies towards conventional loans.- They are backed by different entities - each has its own guidelines and requirements

 

Is it the requirements? 620 vs. a 640? Are the collection issues more a show stopper for conventional loans? If you have a 640 mid score are conventional loan requirements that a person pay 20% no matter what? Or if i have a 620 mid score and 20%-30% down does that pass the first stage of paper qualification? see answers below as you appear to be confusing the two - 

 

Are the down payment requirements different? I have heard of lenders stating 5% down for a conventional loan. How true is that?  What are your experiences? Conv MINIMUM down is 5% FHA 3.5%

 

Does PMI still apply for conventional? If that is the case then why go FHA? What are the requirements for a conventional pmi? Yes but it is not called PMI it is just MI

 

With the way that the housing market is going is it worth jumping the gun or just waiting? hows the market in your area - in my area prices are going up and rates are going up - if you wait you may miss the boat

 

 

I know a lot of the answers to these questions are individual specific or lender relationship/requirements, but is there a method to this? see below


FHA is a Govt loan it has its own requirements but in general it is better for folks with lower credit scores or little to no down payment - it does not require that you have any reserves. Rates do not depend on credit score or lan to value - PMI is for the life of the loan and there is an upfront PMI payment that gets added to the loan amount - 

Conventional is a little tougher - they want higher scores and more down - Rate IS based on loan to value and credit score - any loan with less than 20% down wil require Mortgage Insurance - it too is based on loan to value and Credit scores - Conventional wants reserves (money left over after you fund) for emergencies - Conventional offers a one time upfront option for the MI and if you take this there is no monthly add on for MI - 
FHA ratesa are a little lower but the MIP is a little higher - 
Your best bet when applying is look at both and weigh the options - 
Hope this helps
Brian

 


 


Nicely done Brian! This is what makes thsi forum such a useful and helpful place for many.

 

Like another poster suggested ... I might just add "Brian is right!" to my siggy.

 

Message 3 of 4
dtjones052209
Regular Contributor

Re: FHA vs. Conventional Question

Thanks Brian for the clarification on the questions. Makes the water a little clearer now.



Message 4 of 4
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