FHA or Conventional?

Often times people call and request an FHA loan. FHA loans are a good product, but not always the best. It’s the loan officer’s job to interview you and make sure they find the right product for you. FHA can you give you a good rate with credit scores down to 585, but there is a catch. FHA requires a 3% down payment and you will have to pay mortgage insurance. The mortgage insurance for an FHA loan is less than the mortgage insurance on a conventional loan, but with FHA you will have to pay mortgage insurance for five years regardless of how much your home appreciates in value. There are some non-conventional mortgages that offer a higher rate, but with no mortgage insurance. You may be better off taking that route and it could potentially be less out of pocket at closing. Also, FHA charges a funding fee, which is kind of like an escrow account for you mortgage insurance. Often time loan officers just roll that into the loan, so even though you are bringing in 3%, your loan to value could be higher than 97%. If you have good credit try using a conventional 80/20 for 100% financing, but be careful with the 20% as the rates are much higher on second mortgages. Your payment could be lower if you just pay the mortgage insurance. Remember it’s your loan officer’s job to find the best product, but ask questions to make sure they are doing what is best for you!