Conventional or FHA Loan?
(Long Island, NY)
I currently placed an offer on a home and it was accepted. I have had 2 different mortgage brokers work up mortgages for me but I am still confused....I have options for a Conventional loan and for an FHA but do not know whats in my best interest?
So much to look at as "one" person. I am doing this on my home as a single parent and only one income. Purchase price for the home is $282,000 and I am getting a sellers concession of $6500.00 This added to the $13,500 I am adding gives me about $20,000 to get in the home.
The mortgage insurance is a bit confusing , not to say costly as well. Overall the mortgage brokers tell me it would probably be best to go for a conventional loan but I am not sure if that's true??
I am 44 years old and don't know if either one of these options affect me especially if I decide in a few years that I want to sell as my daughter will go off to college (hopefully)!
Again, just to "recap", the whole "conventional vs. FHA" is what I find hard in making a decision and feeling that it is the best loan for me! Any advice would be appreciated, thank you!
Thank you for coming to my site and giving me detailed information so I can best help you.
You appear from what you are telling me that you are in a great position to buy a house. So your question is FHA vs Conventional. Which is best?
You also mention you may only be in the house for a few years. If your daughter goes off to college it seems as though you may be planning on selling and moving on.
Well, that part of your scenario concerns me the most. Here is the reason why.
If you are pretty sure you will be moving in a few years, the conventional mortgage may be your best fit. But only if the seller concessions of $6,500 will be allowed. Since most conventional loans allow up to 3% this should still work for you.
Now the reason I say conventional rather than FHA is because it should cost you less to close a conventional loan. That way you get the biggest bang for your buck out of the $6,500 paid by the seller.
Also, mortgage insurance is cheaper on a conventional loan verses an FHA loan. You cannot get away from this MIP or PMI whatever they want to call it with low down payments. The only way around this is to put 20% or more down on the house.
However, credit and down payment could be an issue for you. The minimum down payment on conventional loans is 5% if you can qualify. Your credit scores would have to be in the 700 range or higher would be my guess.
The down payment on a $282,000 purchase price at 5% would be $14,100 which is not too far from your $13,500.
So the conclusion of the matter, if you can meet the credit and down payment requirements, then the conventional loan may be the best for you.
If not, then FHA would be the way to go. If you want to learn a bit more on FHA vs Conventional check out the links below.
Which is better, FHA or Conventional for a loan?
Tell me more about FHA mortgage insurance and the costs involved.
Please explain FHA closing costs.
My site is mainly focused at people who are buying their first home and using the FHA 203b home loan. Not many first time home buyers find themselves in your position.
One last thought, you may want to check your local credit union or major bank before working with a mortgage broker. The fees should be lower. In other words, shop around and make them work for your business.
I hope all of this helps. If you don't mind, please click the "Share on Facebook" button below and give me a shout out. By helping others it makes it possible for me to keep this resource free for others to use.
I wish you the best.