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Would you get a conventional or FHA mortgage?

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J

Jumpem

Lifer
FHA (pros: lower downpayment + .25% lower rate, con: $115/month PMI):
Down payment: $5565
Mortgage Insurance down: $1534.35
APR: 4.5%
Monthly PMI: $115
Payment: $1341.45

Conventional (pros: no PMI, cons: .25% higher rate, more down):
Down payment: $12397.55
Mortgage Insurance down: $2115.46
APR: 4.75%
Monthly PMI: $0
Payment: $1218.54
 
Hop on a mortgage calculator and feed that PMI payment in as a portion of the monthly interest payment to find out what the equivalent interest rate would be for the FHA loan. This will get you closer to an apples to apples comparison.
 
Depends on how fast you can have 20% equity in the home. If it won't take you long to have the 20% paid down you'd be better off with the FHA.

Conventional loans still have pmi it's just a lower pmi rate.
 
OILFIELDTRASH said:
Depends on how fast you can have 20% equity in the home. If it won't take you long to have the 20% paid down you'd be better off with the FHA.

Conventional loans still have pmi it's just a lower pmi rate.
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I agree. Even when the OP reaches 20% equity the difference in monthly payments is inconsequential.
 
OILFIELDTRASH said:
Depends on how fast you can have 20% equity in the home. If it won't take you long to have the 20% paid down you'd be better off with the FHA.

Conventional loans still have pmi it's just a lower pmi rate.
Click to expand...

PMI (really MIP) can't be taken off an FHA loan as soon as you hit 20%(really 22%). You have to pay it for 5 years minimum.
 
OILFIELDTRASH said:
Depends on how fast you can have 20% equity in the home. If it won't take you long to have the 20% paid down you'd be better off with the FHA.

Conventional loans still have pmi it's just a lower pmi rate.
Click to expand...

There is no monthly PMI paymnt on the conventional. Just the $2115.46 mortgage insurance payment due up front.

As for reaching 20% equity, it would be probably be four years or so. I will be putting extra money towards paying off my wife and I's student loans, before paying extra on the mortgage.
 
Turin39789 said:
PMI (really MIP) can't be taken off an FHA loan as soon as you hit 20%(really 22%). You have to pay it for 5 years minimum.
Click to expand...

Wow really? I guess I'm going conventional on my next house providing this is true or I'm saving up the 20% down before I get into the home. Does pmi come off the conv loan as soon as 20% is met?
 
Turin39789 said:
PMI (really MIP) can't be taken off an FHA loan as soon as you hit 20%(really 22%). You have to pay it for 5 years minimum.
Click to expand...

So that would force me to pay a minimum of $6900 in mortgage insurance. That eats up alot more than .25% lower rate would save me.
 
Jumpem said:
There is no monthly PMI paymnt on the conventional. Just the $2115.46 mortgage insurance payment due up front.

As for reaching 20% equity, it would be probably be four years or so. I will be putting extra money towards paying off my wife and I's student loans, before paying extra on the mortgage.
Click to expand...

There is where I'm at (Tx).
 
Go to a good mortgage lender and they can do all the math you could possibly want and tell which loan is the best....and why. Least thats what my lender did. She literally looked at each loan, plugged in my three "options" for down payments. (im still up in the air on exactly what i want to put down so ran different numbers) and basically showed me which loan would save me the most money. For me it was easily USDA. Followed by conventional, followed by FHA. Well FHA and conventional sort of flipped back and forth depending on down payment amount.

One thing she did mention is rather than solely going on the interest rate look at the APR. You might have but not sure since you listed the loan rates as APR in your op. Just a tidbit on it "Since the APR includes the interest rate, fees, points, and mortgage insurance, it is a more complete measure of a loan's cost than the interest rate alone"

ps rates dropped friday. FHA and USDA are ~4.3%
 
velillen said:
Go to a good mortgage lender and they can do all the math you could possibly want and tell which loan is the best....and why. Least thats what my lender did. She literally looked at each loan, plugged in my three "options" for down payments. (im still up in the air on exactly what i want to put down so ran different numbers) and basically showed me which loan would save me the most money. For me it was easily USDA. Followed by conventional, followed by FHA. Well FHA and conventional sort of flipped back and forth depending on down payment amount.

One thing she did mention is rather than solely going on the interest rate look at the APR. You might have but not sure since you listed the loan rates as APR in your op. Just a tidbit on it "Since the APR includes the interest rate, fees, points, and mortgage insurance, it is a more complete measure of a loan's cost than the interest rate alone"

ps rates dropped friday. FHA and USDA are ~4.3%
Click to expand...

I may have called the interest rate the wrong thing then. I am going to try to have her lock in rates tomorrow in case things go crazy on Tuesday.

I wish we qualified for USDA.
 
Jumpem said:
I may have called the interest rate the wrong thing then. I am going to try to have her lock in rates tomorrow in case things go crazy on Tuesday.

I wish we qualified for USDA.
Click to expand...

Dont worry i was too when i started. And was quickly corrected! interest rate is good starting point as its a nice this is what the loan interest is but the APR is sort of a "all things in one" percent rate.

I know talking to my lady she thought the rates might drop slightly more on monday, but then go back up on tuesday most likely. Im damn happy with 4.375 though so id rather lock that in than play the it might go down more during the day game.
 
APR is allowed to be calculated differently so it is not necessarily an apple to apples comparison: http://askcarolynwarren.com/page4/page4.html

You have to look at Good Faith Estimate, and more importantly, make a judgement call on whom you are dealing with because there are really no penalties for lying on GFE - all that matters is promissory note and HUD-1 settlement statement you sign at closing.

You could also have Carolyn Warren look at both options and get her input for low fee (no affiliation with her; I just bought her books and thought they were excellent): http://askcarolynwarren.com/page11/page11.html
 
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