First time home buyer -- FHA vs Conventional -- Help please

[mwm1212]

Has anyone had experience as a first time home buyer recently? My wife and I are in the process of putting our documentation together to apply for a loan and I have waded through a considerable amount of information, but have been unable to determine which is best for us. From what I can tell FHA is a signifcantly better rate, requires a lower down payment, etc. I can't figure out why conventional would be appealing, which leads me to believe I may be misinformed. The only downside I found was that there is extra red tape involved in an FHA loan which can be a turn off for the seller. Am I missing anything else? Some information below and any help or suggestions are greatly appreciated:

Open to any property type in Washington DC or Northern Virginia area

$450-475k budget (hopefully)

$40-50k down payment

$155k combined income (both have a little over 3 years with current employers, no gap in job history)

My FICO 767, wife is 800+ (no lates, no recent inquiries, etc)

No cc debt, $300 student loans/month, $550 in combined car payments (only ~7k balance owed between the two vehicles)

[Peter1142]

The FHA MI (Mortgage Insurance) is higher and for the life of the loan. It would be probably $500+/month on a $400k+ loan. The mortgage insurance is included in the APR but not in the rate. The PMI for a conventional loan with your high credit scores will be much less, and will decrease each year.

From what you have posted, your credit scores and the money you have to put down, I think you should look at a conventional loan. It will be cheaper.

Plus, if you are looking for $450-475k (assuming you qualify for this much), this might not be eligible for an FHA loan depending on where you live. This may even be a jumbo loan for conventional not sure what exactly the cutoff is or how that works, I never looked that high.

[mwm1212]

Thanks for the quick response! That makes a lot of sense and makes conventional seem much more appealing.

The maximum loans in this area are higher for both FHA and conventional from what I read also. Thanks again for the help.

[n0smirc]

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@mwm1212 wrote:

Has anyone had experience as a first time home buyer recently? My wife and I are in the process of putting our documentation together to apply for a loan and I have waded through a considerable amount of information, but have been unable to determine which is best for us. From what I can tell FHA is a signifcantly better rate, requires a lower down payment, etc. I can't figure out why conventional would be appealing, which leads me to believe I may be misinformed. The only downside I found was that there is extra red tape involved in an FHA loan which can be a turn off for the seller. Am I missing anything else? Some information below and any help or suggestions are greatly appreciated:

Open to any property type in Washington DC or Northern Virginia area

$450-475k budget (hopefully)

$40-50k down payment

$155k combined income (both have a little over 3 years with current employers, no gap in job history)

My FICO 767, wife is 800+ (no lates, no recent inquiries, etc)

No cc debt, $300 student loans/month, $550 in combined car payments (only ~7k balance owed between the two vehicles)

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With those scores + downpayment. Conventional all the way. Like the pp said, your mortgage insurance will be tremendously lower.  Your area has a higher conforming loan limit for 2014 and your scores are great. (Just ensure the word "dispute" doesn't appear anywhere on your report before the pull)

[tooleman694]

Yup the PMI is where its at, if you can go conventional it is the way to go typically..

Before the rule changes this year, FHA was cool in some cases..

I went FHA to buy our home, but I wish I could have gone conventional.. I could have saved 300 dollars a month on my mortgage payment..

I have to wait out the 5 years on the PMI before it drops off.. its going to cost me 3k a year times 5 years..

[mwm1212]

As always, fantastic advice on these forums. Thank you to everybody who replied.