Conventional loan or FHA loan which is better for me?

A lot of people ask me which loan should I get. My answer is it depends on your situation. Both FHA & conventional loans are good loans.



Here are the main reasons to use either Conv. or FHA loan.

FHA- If you have lower income and want to put down only 3.5%. If your credit score is below 660. You had a bankruptcy that was discharged at least 2 years but now for 4 years. You had a foreclosure that has been over 3 years but less than 7 years.  Your debt ratios are more than 50%. You are buying a multi-unit property 2-4 unit and you only want to put down 3.5% not 5%.

Conv.- You have good income and you have the minimum 3% to put down, or you can get a gift for the 3% down payment. Your credit scores are above 660. You are buying a condo that is not FHA approved. FHA has mortgage insurance for the life of the loan.  Conv has it until you have 20% equity in the home. You can also get a conv. loan with no mortgage insurance up to 95% loan to value. You can waive escrows up to 90% loan to value, FHA will not allow you to waive escrows. You do not have Up Front Mortgage Insurance. FHA will only allow owner occupied mortgages.

Rates are better with FHA  and with FHA lowering the mortgage insurance, your payment will be lower if you are putting down less than 20%.