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Today's Mortgage Rates
| FHA vs. Conventional | ||
|---|---|---|
| FHA | Conventional | |
| Down Payment | Minimum 3.5% | Minimum 10%+ |
| Closing Costs | Low, regulated by HUD | Unknown/Vary greatly |
| Post-bankruptcy Qualifying? | Can qualify after 2 years | Can qualify after 2 years |
| Post-foreclosure Qualifying? | Can qualify after 3 years | Generally after 5 years |
| Private Mortgage Insurance | Low cost | Ranges from low to high cost |
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FHA vs. Conventional Loans
FHA Loans have several advantages over conventional loans, including lower down payments and more relaxed credit-qualifying guidelines. The federal government created FHA loan programs to encourage homeownership throughout the country. The FHA can help people to obtain a loan with little or no down payment. The FHA does not supply the loan; it simply insures the loan to limit the risk to the lender.
Benefits of a FHA mortgage:
- A 3% down payment, as opposed to a 5% down payment on traditional loans
- Low monthly mortgage insurance
- Low closing costs, which are regulated by HUD
- No credit score requirements
- Qualify for a loan two years after a bankruptcy
- Qualify for a loan three years after a foreclosure
The FHA loan guidelines are more relaxed than conventional loan guidelines; this includes less strict regulations about past bankruptcies and/or foreclosures, job requirements, use of alternative credit, and debt-to-income ratios. The FHA ensures that their interest rates remain competitive with the interest rates of conventional loans.
FHA loans were originally created to help first-time buyers; people who are not first-time buyers may qualify, however, the FHA does not allow anyone to have more than one FHA-insured loan at a time.
The borrower is required to pay an insurance premium upfront, but this premium can be financed into the loan amount directly. The borrower must also pay a monthly premium, which is .5% of the total loan amount divided equally over 12 months. Unlike a conventional loan, the FHA requires a termite report and clearance, as well as a few other property condition standards, to qualify for a loan.
If you would like more information about the benefits of a FHA loan, please complete the FHA home loan form.
FHA Refinancing
You may refinance a conventional loan to a FHA loan. Options include: Cash-out Refinancing, Rate Refinancing or Term Refinancing. The FHA offers borrowers debt-consolidation programs, and the option to consolidate two mortgages into one FHA mortgage. The benefits of FHA loans, such as low closing costs and more relaxed credit and income qualifications, also apply to FHA refinances. Streamline refinancing is the only type of FHA refinance that requires the original loan to be FHA-insured.
If you would like more information about the benefits of a FHA refinance, please complete the FHA refinance form.