Fha Vs Conventional Loans Compare Fha Loans Vs Conventional loans

1. FHA vs. Conventional Loans - COMPARE
FHA vs. Conventional Loans
FHA - Rates are lower than Conventional
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FHA vs. Conventional Loan Financing
Streamline Refinancing / Purchases
FHA - Rates are lower than Conventional
The main advantage to FHA home loans is that the credit qualifying criteria for a borrower are not as strict as
conventional financing.
FHA will allow the borrower who has had a few "credit problems" or those without a credit history to buy a home.
FHA was created by the federal government to provide affordable housing financing for qualified borrowers. FHA
provides 100% of the loan, the lender eliminating risk. The borrower pays an initial insurance premium, which is
approximately 1.5% of the loan amount. This amount can be absorbed directly into the loan amount. The
borrower also pays a monthly premium of .5% of the loan amount divided by 12 months. FHA requires deposit of
3%. This money can be a gift. No reservations are necessary. Closing costs can be funded in the amount of the
loan.
FHA Loan Borrowers must provide proof of income sufficient to demonstrate the ability to pay the mortgage. FHA
guidelines are more relaxed, for example, a bankruptcy, which was unloaded at least 2 years, the use of other
forms of credit (utilities, cable TV, auto or medical insurance premiums, caring for children, school fees, furniture
FHA Resources or appliance store accounts) Place of traditional credit, and higher ratios of debt to income. FHA interest rates are
extremely competitive with conventional rates.
FHA Stream line Refinance
Fannie Mae conventional loans are loans made at the risk of the borrower, without the benefit of any warranty
insurance or government. A conventional mortgage with a LTV (loan to value ratio) of more than 80% requires
primary mortgage insurance, which can be paid monthly. The borrower must have 5% of its own funds for the
payment and 2 months reserves of the deposit. Closing costs should be paid by the borrower. requirements for a
conventional loan include an excellent candidate to credit, job
stability with sufficient income, a significant down payment, and a low debt to income. Borrowers who meet
Fannie Mae guidelines are rewarded with an interest rate slightly lower than an interest rate FHA.
Conventional mortgage lenders (Fannie Mae, Freddie Mac) actually allow their borrowers with good credit to
remove the mortgage insurance if the remaining loan is less than 80% of the house appraisal. On the other hand,
FHA Loans does have several schemes in force for foreclosure protection to help homeowners who are in trouble
to continue afford the mortgage installments. This can be very useful if you are worried about future financial
hardships.

2. FHA vs. Conventional Loans - COMPARE
FHA loans compare to conventional loans?
Conventional loans usually require a larger down payment. And, if you have less than perfect credit you may not
qualify for many conventional loans and find yourself being offered loans with higher interest rates and/or fees
than you expected. The best thing to do is compare the cost of the conventional loan to an FHA loan line-by-line.
What are the fees, interest rate and mortgage insurance on each? How much down payment is required? For some
borrowers, a conventional loan may be less expensive. For many others, it will be more expensive than FHA.
Example
FHA Conventional
Maximum Loan Limits per County Yes No
Mortgage insurance included in loan Yes Not always
*Maximum purchase loan 97% 107%
Rate depends on Credit Score No Yes
Seasoning requirement for bankruptcy 2+ yr None with some programs
Seasoning requirement foreclosure 2+ yr Varies on program
Open Collections None Varies on program
Drop mortgage insurance with equity No Yes
Non-verified (stated) income programs No Yes
Streamline refinance Yes No
Non-occupant cosigner Yes No
* There is a 102% FHA program- 97% first mortgage and a 5% second mortgage. Qualification for the
5% second mortgage though is based on low income limits set per county.
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