FHA vs Conventional

Why FHA Features: Many people wonder why I should consider an FHA loan. I’ve heard so many negative things about them. They are very expensive. They have (MIP) acronym for Mortgage Insurance Premium. They have (UMIP) acronym for Unified Mortgage Insurance Premium.

The popularity of FHA financing has changed over the years. FHA is easier to qualify for compared to Conventional financing. The differences are in the down payment, debt to income, MIP, UMIP, Gifting, Co-borrowers, and low credit or Fico’s are allowed. Here are some of the updates… For purchase, you can get an incredible 96.5% financing from FHA. So you only have a 3.5% down payment plus closing costs. If you have an alert realtor, you can ask that seller to pay your closing cost. Sometimes a motivated seller will do this to close the deal.

Down payment assistance:

Do you need help with the down payment and closing cost? In some instances, some counties offer down payment assistance up to $70,000…The types of programs depend on each county. Some have a no pay back are a payback arrangement after you sell your residence. That can be a substantial assistance in making your purchase a huge success. Family members can also make a gift towards the downpayment.

Debt to Income ratio:

The debt to income ratio can be critical but can be solved by several options. A knowledgeable mortgage consultant can help find which strategy would be best for you. Known by the acronym DTI maximum allows borrowers to spend up to 55 to 57 percent of their income on monthly debt obligations, such as mortgage, credit cards, student loans and car loans. In contrast, conventional mortgage guidelines tend to cap debt-to-income ratios at around 43 percent. 80% Financing with a 20% down is standard. If you don’t have the 20% down, you can go with 10% or maybe even 5%. But you will have MI monthly mortgage insurance. Some lenders will pay for it in the form of a higher rate.  This is one of the reasons why FHA is so popular. Its easier to qualify for.

Not enough income:

But what if you still do not have enough income. What do you do? Well, there are several ways to make your purchase happen. You can buy down the rate to a lower rate. You can make a larger downpayment. Instead of a 30 year fixed go for an Arm-adjustable. Adjustable arms come in a 3,5,7 and 10-year fixed arms all amortized over 30 years…There are so many ways to achieve your purchase or refinance. You just need to ask the key questions? What is the purpose of my loan. How long do I intend to stay in my home? Will my family outgrow this home in the next 5 years? Is this my starter home? Will I want to move up to a better neighborhood or better school district.