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Now that FHA pmi lasts the loan's lifetime, will conventional loans always be a better option?

by BPeltzer from Nampa, Idaho. Mar 25th 2013 Reply


Barb Lanis (BarbLanis)
#71 ranked lender in Illinois - 663 contributions

Since FHA is essentially broke, I would say Yes, Conventional will be the best option going forward. Maybe in 4+ years, FHA will recoup their losses and get hungry again for mortgages and perhaps reduce their premiums.

Mar 25th 2013
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 1,823 contributions

NO. Standards to qualify for a conventional loan are typically higher than for an FHA, so for many people, the choice is buy now with FHA or wait a year, two or longer to become a better quality borrower. For others, FHA is the ONLY choice. The downside to waiting is that in an up market like we're in now, waiting a year could mean the home of your dreams could cost another $40,000 or more. Still worth the wait to avoid MIP? ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ Licensed in California and Arizona ~ www.LoansA2z.com 888-889-9950

Mar 25th 2013
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Ron Pippin (RonPippin)
#26 ranked lender in Utah - 158 contributions

FHA PMI acutally won't last the life of the loan until June, but that's just right around the corner. FHA in some cases may still be a better option. Lower credit scores may prevent someone from obtaining Mortgage insurance or you may get a higher interest rate on conventional loans with lower scores. Also FHA has the option of 3.5% down instead of 5% down. They also have more flexibility for other loan programs such as first time bueyr programs (where little to no-money down is needed) or grants where conventional may not.If someone were to have the 5% down and decent credit scores, conventional may likley be the best option.

Mar 25th 2013
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Dave Metsker (DaveMetsker)
#37 ranked lender in Oregon - 2,317 contributions

Consider a conventional loan if you have more than 20% equity or down payment. Otherwise, consider FHA, even with life-of-loan mortgage insurance.

Mar 25th 2013
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Peter Savino (855411LEND)
#100 ranked lender in New Jersey - 332 contributions

The best option is really based on a clients needs - Convention loans have higher credit score requirements and lower dept to income ratios, So Fha is still going to be an option for many buyers. www. HOMEMORTGAGEXPERT.COM

Mar 25th 2013
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Bryan Horn (bryanhorn)
#876 ranked lender in California - 19 contributions

If you can save a 3.5% down payment then you might as well save another 1.5% or take a loan from your 401k and go conventional. That way you don't have those high Mortgage Insurance (MI) payments.But if you must go FHA because you had a short sale within the last 3 years or a recent foreclosure then go FHA and once you have 20% equity refi into a conventional loan. Problem solved!

Mar 25th 2013
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Carlos Figueira (carlosfigueira)
#108 ranked lender in New Jersey - 198 contributions

Depends on your needs, but with increases to the annual and monthly premiums over the last 2 years.......conventional is better option if you qualify.

Mar 25th 2013
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Janine Bodway (Janine)
#25 ranked lender in Hawaii - 9 contributions

I feel it best to have calculations completed on your individual loan in order to give you an accurate outlook and compare options. Yes FHA is becoming quite expensive and there are often alternatives that can reviewed. Rural Development is also a great program, 100% financing and the PMI is only .40 compared to the new increase with FHA up to 1.35 over 95% LTV . If down is not a problem, but still not 20%, then you can look at lender paid PMI or even Split PMI, where a portion is paid and close and the balance is paid monthly reducing the premiums quite a bit. Seller credits or lender credits can also be used to assist with these costs. Contact me and we can get started today, Janine Bodway - jbodway@acceptancecapital.com

Mar 25th 2013
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Andrew Alfonso (CashCow)
#43 ranked lender in Florida - 271 contributions

Good Question. The answer is yes and no - each individual situation will dictate a borrower's best interest -- Find a good broker. Andrew

Mar 26th 2013
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Michelle Curtis Loan Originator NMLS 401173 (EmbassyFundingLLC)
#77 ranked lender in Florida - 2,240 contributions

Conventional is always a better option if you can qualify and the #'s make sense.Call us or email us at 201-962-3555 or Team@BestMortgageOption.com for ano cost no obligation analysis of your situation.Ask for Michelle or Benny We will find the Best Mortgage Option to suit your needs!You can check us out at www.BestMortgageOption.com

Mar 26th 2013
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Phil Dumouchel (PhilDu)
#32 ranked lender in South Carolina - 2,240 contributions

Lots of great responses and info above. FHA insurance doesn't become permanent until June 1, after new case numbers will require the insurance to be paid for the life fo the loan. It really depends on the qualificationsof the borrower whether convention mortgage insurance will be a better options. Currently FHA loans have lower interest rates than conventional, especially for borrowers with lower credit scores. A good loan officer will always look at all available options and help the customer figure out what is best for their qualifications.

Mar 26th 2013
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