Buyers with a minimum down payment are generally faced with the decision of whether to get a FHA or a conventional loan. With the new 3% down payment program on conventional loans, it may become more confusing which loan to pursue.
The two loan programs have mortgage fees that can differ greatly. FHA has a 1.75% up-front mortgage insurance charge in addition to the monthly mortgage insurance charge which was recently lowered by .5%.
FHA’s mortgage insurance is a fixed amount where conventional mortgage insurance providers’ fees are determined by individual companies and according to the credit score of the borrowers. A borrower with a good credit score will be charged less than a borrower with a marginal credit score.
Mortgage insurance on conventional loans can be cancelled when the equity in the property reaches 20%. FHA mortgage insurance in most cases, is paid for the life of the mortgage. Once a borrower has a 20% equity in their home, to eliminate the monthly FHA mortgage insurance, they would need to refinance the home with a conventional loan and would not be eligible for any refund of the up-front fee paid at closing or added to the mortgage.
If a borrower has a low credit score, FHA may be the better choice because conventional underwriters may have a higher minimum score. FHA loans also tend to be more lenient than conventional loans when a borrower’s total monthly debt exceeds 45% of their monthly income. FHA tends to allow borrowers a shorter time frame after foreclosures and bankruptcies.
The decision-making factor is which mortgage will provide the lowest cost of housing including payment and all loan fees. A lot of information is necessary to make a good decision and typically, the borrower isn’t able to acquire it on his/her own.
A trusted mortgage professional is very valuable in not only providing the information but guiding the borrower through the entire process. Your real estate professional is uniquely qualified to make such a recommendation.
Author:Melissa Hardman Phone: 319-269-0304 Dated: March 24th 2015 Views: 1,279 About Melissa: ...
My name is Carl Ericson and I am a REALTOR with Oakridge Realtors in Cedar Falls, Iowa. I am in my eleventh year as a REALTOR. I work in Cedar Falls, Waterloo, and surrounding communities including Waverly, Hudson, Dike, Denver, and Evansdale.
I specialize in residential sales, investment properties, and new construction. Through hard work, experience and knowledge I become my clients real estate consultant. I helps my clients make sound real estate decisions and consult with my clients when they are contemplating a future real estate move.
I graduated from the University of Northern Iowa with a B.A. in Management: Business Administration and a Real Estate minor. I was involved with Rho Epsilon real estate club while I attended the University of Northern Iowa.
I have called the Cedar Valley home since 1987. I grew up in the area and believe that the Cedar Valley is truly a great place to live. I believe the Cedar Valley offers many features for people to enjoy including: arts and entertainments, sports, recreation, shopping, quality jobs, a great atmosphere, and much more.
If you are thinking about a real estate move, please contact me for a personal consultation.
Carl Ericson | Realtor®
Licensed in Iowa | #S43269000
Oakridge Realtors | 3313 Terrace Drive, Cedar Falls, Ia 50613
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"Carl went above and beyond to help Danielle and myself find our new home! From late night tours to calls informing us of new openings later in the day. He knew exactly what we wanted/needed in a home. We can't express how much Carl helped us throughout this entire process and can't thank him enough! Voted "Best of the Best" for a reason. Thank you Oakridge Realtors and thank you Carl for helping find our new home!!"