For home buyers with good credit scores, a conventional loan may be more attractive. That's because conventional loan costs are more dependent on your credit score and down payment than FHA loan costs. And as a result, your monthly payments and PMI are lower when your credit score is higher.
FHA is generally better for people who don't have as much cash in savings. Allows for smaller down payment with some caveats (insurance for the entire life of the loan). Conventional is better if you have more savings and therefore can put more money down.
You cannot get rid of the PMI on an FHA mortgage. The only choice you're going to have is to refinance out of it completely. When you get an FHA mortgage, it's going to retain the PMI for the life of the loan.
FHA mortgage loans don't require PMI, but they do require an Up Front Mortgage Insurance Premium and a mortgage insurance premium (MIP) to be paid instead. Depending on the terms and conditions of your home loan, most FHA loans today will require MIP for either 11 years or the lifetime of the mortgage.
Conventional loans require monthly private mortgage insurance (PMI) when borrowers put down less than 20%. By refinancing to a conventional loan once you have 20% equity, you can eliminate FHA MIP and you won't be subject to PMI. Or, you could refinance into a conventional loan with PMI now.
FHA loans require borrowers to pay a mortgage insurance premium, which is usually much higher than private mortgage insurance on conventional loans. Conventional loans generally have lower interest rates than FHA loans and can be easier to qualify for because they don't have minimum credit score requirements.
Sellers often prefer conventional buyers because of their own financial views. Because a conventional loan typically requires higher credit and more money down, sellers often deem these reasons as a lower risk to default and traits of a trustworthy buyer.
Drawbacks include stricter requirements to qualify, large payments if market rates increase, lack of 5% equity requirement, and additional fees if borrower has a less than excellent credit score.
FHA Rates for 700 Credit Score
As of early October 2024, the national average interest rates for FHA loans have shifted significantly compared to previous months. Here are the figures for FHA mortgage rates for borrowers with a 700 credit score: 30-Year Fixed Rate FHA Mortgage: Approximately 6.03%.
The closing costs in your FHA loan will be similar to those of a conventional mortgage loan. These costs typically will be around 2% to 6% of the cost of your property. Your costs will be tied to things like your loan amount state the property is located in and lender fees.
FHA loans require you to pay for mortgage insurance when you buy or refinance a home, regardless of the amount of your down payment or home equity.
If you can afford it, putting 20% down on a house is ideal. It helps you avoid private mortgage insurance (PMI), reduces your loan amount, and lowers monthly payments.
No matter how large a down payment FHA borrowers make, they're required to pay FHA mortgage insurance premiums. FHA mortgage insurance includes both an upfront premium that's often paid at closing and an annual premium that may have to be paid for the life of the loan.
The higher your LTV ratio, the higher your PMI payment. Your loan type: Because adjustable-rate mortgages (ARMs) carry a higher risk for lenders, your PMI might be more expensive with an ARM than with a fixed-rate loan. Your down payment amount: The closer your down payment is to 20 percent, the less your PMI.
Some reasons a seller might refuse an FHA loan include misconceptions about longer closing times, stricter property requirements, or the belief that FHA borrowers are riskier.
With FHA loans, you also have to pay an upfront mortgage insurance fee. This can be financed, but it will cause your mortgage insurance payments to be more expensive than with a conventional mortgage. Inspection standards: To qualify as an FHA-eligible property, a home must go through a property standards inspection.
Must have an undamaged exterior, foundation and roof. Must have safe and reasonable property access. Must not contain loose wiring and exposed electrical systems. Must have all relevant utilities, including gas, electricity, water and sewage functioning properly.
No, FHA loan PMI removal is technically impossible because PMI is for conventional mortgages only. FHA loans have MIP, which usually lasts 11 years or the life of the loan. To remove MIP, you must refinance into a conventional loan once you have enough equity.
An FHA loan may be a better option if you have a lower credit score, a higher DTI ratio, or less money saved for a down payment. On the other hand, a conventional loan may work better if your finances are sound and you can qualify for favorable loan terms.
Current Up-Front Mortgage Insurance Premium
The UPMIP is currently at 1.75% of the base loan amount. This applies regardless of the amortization term or LTV ratio.