FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware

I know some loan officers will debate that conventional mortgages can be better than FHA mortgages, but I always thought that real numbers always outweighed opinion. Aren't real facts correct over opinion?  As long as these figures are accurate, right?

Yes, conventional mortgages are better if you have a credit score over 679 and if you have 15% down or more or 85% or less equity in your property. And we can get into more details, in regards to declining markets, monthly mortgage insurance, etc, etc. But let me just show you the basics and you can be the judge yourself.

But before I continue, here is one reason why some lenders say that FHA mortgages aren't as good. Many lenders are still not FHA approved, which means that they might not have your best interest at hand. Even though that particular lender is giving you their best mortgage program, is it the best program for you?

Now, things have changed in the last month. FHA/HUD has raised their maximum loan limits and in some areas, much higher. The new loan limits can be found here : https://entp.hud.gov/idapp/html/hicostlook.cfm But these new loan limits have come at a price per se. Many lenders have raised their fico score requirements for you as a borrower to obtain these new loan limits. I have been interviewing other lenders nationally and many have said that you need anywhere from a 620 to 660 to obtain these new limits. In regards to my company, I can go down to a 580 credit score.

In regards to the lower limits, the old FHA mortgage limits, many companies have a cut off of 580 to 600. I can still go down to a fico score of 500. When it comes to a conventional loan, you typically can't get a loan approved with a credit score below a 620. Sure, equity and cash reserves can help the cause, but your rate will still be much higher than if you went FHA.

The figures that I am about to show you are based on a $300,000 purchase price with 10% down. One reason why conventional rates are a little higher in this scenario as in FHA rates is because Fannie Mae and Freddie Mac have added penalties per se. If you are putting down less than 30% and your credit score is less than 680, certain fee penalties would apply to you, which would increase your rate.  The FICO (credit score) that I am going to use is 620.  The reason why I didn't show a 619 score or below is because some mortgage insurance companies don't allow for  conventional mortgages with 10% down or less and a score below 620.  ***And keep in mind, some lenders have penalties on FHA mortgages with credit scores under 620. It all comes down to the investor. We don't have penalties on any credit score above 580.*** 

Disclaimer :  These rates are just an example and can change because of various market conditions and are based on a 30 year fixed rate of today. The fees would be the same and with 1 point, so to compare this scenario as apples to apples. The conventional rate also includes the penalty for the 620 credit score.

Some of you might be saying that you will be adding $4,050 onto your principal balance if you did the FHA mortgage because of the FHA one-time mortgage insurance premium. This is correct and I don't want to confuse you with more numbers and charts. But here is a quick breakdown. If you kept your house for 5 years, which most people sell in a 6 year period, you would have saved $12,092.40 in that time period. This is a difference of $8,042.40 that you have saved!!!   And one other thing that is very small, but still makes a difference. You will be subtracting a few more dollars per month from your principal because your interest is lower. Just something else to remember.

Overall, if you think about it, the average person doesn't have $30,000 to put down on a house, let alone, have credit scores above 680. And this comparison was using 10% with credit scores of 620. If you would put only 5% down on this scenario, your monthly mortgage insurance would actually be $185.25 on a conventional loan compared to $118.25 a month on a FHA mortgage. That just alone would mean that your mortgage payment would be $63.00 higher than on a FHA mortgage.

Here is another good post to read to give you good insight on what I am talking about : 

• Top 10 reasons FHA is a great way to finance your home....
  

And Chaz Ramirez gives some more insight to FHA mortgages, compared to other programs here :

• Blue Ink vs Red Tape a.k.a. FHA vs Subprime

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

 
Copyright © 2008  by Jeff Belonger