why do sellers prefer conventional over fha

The terms and conditions do not thrill us. I am under the 80/20 LTV requirement. Again, this is subject to lenders actually offering programs for scores this low. Some only require it for 11 years, though most borrowers will have it for life because they put very little down. The blue shaded sections show when you’re better off going with a conventional home loan. Is this true?? Borrowers who use FHA loans to purchase a home have to pay two different mortgage insurance premiums (MIPs). can i go from my FHA loan to conventional loan? As such, FHA appraisals are usually more strict than conventional appraisals. I never inquired about getting my PMI removed after five years being that I didn’t know I was able to do that until recently. No Mortgage Insurance Requirement on Conventional Loans. They might also consider asking for less in seller contributions to help with closing costs. The FHA must approve the refinance, even though you are moving to a non-FHA-insured lender. Summary: The VA Home Loan Program is the most important benefit available to veterans who have served our country in the military or who are still serving. Ask the lender to be sure. Ask the lender to break down ALL the costs and do a side-by-side comparison to determine the differences. But the appraiser has some other research to do as well, such as reviewing comparable sales. This is why FHA homeowners who do a FHA refinance will always be advised to close at the end of the month, so they don’t get charged double interest. With an conventional loan, I have the 7% down payment, DTI is 12% and the credit score. FHA Loans Are Flexible FHA home loans aren’t just for one type of home, or for one type of buyer. Can you tell me the best way to look for a conventional loan. In most cases, the appraisal can be completed within a matter of days. The same can be said for conventional. Does it make a difference which mortgage broker a person goes with? Another reason why sellers prefer conventional loans over FHA loans is that they believe that the buyer has stronger financials. The condos are not FHA approved. But thanks to new guidelines issued by Fannie Mae and Freddie Mac, you can now get a conventional loan with just 3% down . Conventional loans do not require UFMIP, even where private mortgage insurance (PMI) is required. As noted, conventional mortgages require a down payment as low as three percent, so low down payment borrowers with good credit may want to consider conventional loans first. That pretty much ends the discussion if you’re planning to buy even semi-expensive real estate there. 2. I have been working with a mortgage company since May on a conventional loan. To qualify for an FHA loan, the appraisal must show: The roof is in good repair with no work needed for two years. I also have always carried my own escrow and was putting down enough to bring the loan to value amount below 80%. You probably know sellers love all-cash offers. However, it may not be an issue for you because your DTI ratio is already so low. Copyright © 2006-2021 - The Truth About Mortgage.com, Powered by the lovely Wordpress platform. Here’s how to decide which loan is right for you. Hello i want to refinance my house because my interest rated is at 6.5 percent the only loan i qualify is the FHA loan . What are the pitfalls for the seller with FHA financing? The FHA Appraisal To secure a mortgage, the property must meet FHA minimum standards and meet a fair market value. my agent has other back up offers on stand by, in case my contract falls thru. For FHA loans, down payment of 3.5 percent is required for maximum financing. It’s true that many condos aren’t eligible for FHA financing, as far as why the lender chose FHA I don’t know. Thank you, Carol. Also consider the long term picture. So it really depends on the bank in question. The rate and fees make the FHA loan the most desirable option for lower credit score borrowers. I have FHA loan, the house was 180k and I down payment 19k with 4.7% interest. You can get an FHA loan with a 3.5% down payment and a 580 FICO score, Or a conventional loan with just 3% down and a 620 FICO score, FHA is more flexible in terms of credit score, But be sure to consider the cost of mortgage insurance when comparing the two loan programs, There’s not one clear winner for all loan scenarios, It will depend largely on your credit score, FHA loans tend to benefit those with low credit scores, While conventional loans are often cheaper for those with better credit, FHA rates are typically lower than conventional rates, But the spread can vary and not be all that different, You also have to consider the entire housing payment, Factoring in mortgage insurance and closing costs, Mortgage insurance is unavoidable on an FHA loan, And will often remain in force for the entire loan term, Conventional loans allow you to drop MI at 80% LTV, Access to more loans programs (fixed, ARMs, etc. My state has a special program for educators who earn less than 70k. Great site and thank you for your many posts responding to so many people! FHA Loans vs. 3.5% down, owner occupants only. I don’t know what the terms of a conventional loan would have been, so it’s impossible to tell you with certainty. It’s always smart to take the time to compare loan options just in case one turns out to be a better deal for you. Our land was appraised for 63k, and we started to go with the conventional loan, but we are afraid that we will not qualify or receive a high interest rate because of our credit that we are trying to clean up. Good luck! At the start if this comment thread in 2013 the MIP was really high on FHA loans, but are much lower now in December 2020? They also generally have lower closing costs than. Of course, you’ll need to plug in your actual numbers into a mortgage calculator to see what works for you. You may want to get a second (or third) opinion on your financing options. Don’t just take their word for it! And the minimum down payment requirement is lower! FHA Loans Are Flexible FHA home loans aren’t just for one type of home, or for one type of buyer. However, we just failed the FHA appraisal due to septic distance from well (needs to be 50 feet, we are at 45 ft) . It’s been a great help. If the appraiser is good at what he or she does, then the price will usually be close to the market value of the home, but not always. If you go conventional you won’t have to deal with mortgage insurance. Generally speaking, those with low credit scores and little set aside for down payment may do better with an FHA loan, whereas those with higher credit scores and more sizable down payments could save money with a conventional loan. Unfortunately, for borrowers with VA financing, this can be difficult. What’s the appeal of the FHA mortgage loan? My credit score is 720 and I have the 20% down. They have a similar mission to promote homeownership and compete with one another, but they are two completely different entities. The LTV criteria has been eradicated? His asking price is a lot less then what it’s valued at. Conventional loans: It is possible to find a conventional loan … Would we have PMI for the life of the loan? A. I also pay 800 a month in student loans. That's why they like FHA 203k over FHA 203b. Cash sales made up 22% of sales in December 2018, which is up from 20% the year prior, according to data from the National Association of Realtors. Some even claim FHA loans are the “new subprime” due to the dubious mix of low down payment and credit score requirements, despite originally being geared toward low and moderate-income borrowers. Thanks for the side-by-side comparison. I’m renting a home now an the owner wants to sell. If you are selling your home, you and your real estate agent need to know some important points about FHA home loans to help you make the best deal possible. This can be a real lifesaver for those living in high-cost regions of the country (or even expensive areas in a given metro). We thought we were going to have a VA loan, but they denied us. 2nd question. In the past, certain loans (less than or equal to 78% LTV and 15-year term) could avoid annual mortgage insurance, but not any longer. My income is only about 60k per year though since I work in education. Will we be able to get a loan? The upside is that the 3.25% rate is likely much better than the rate you’d probably receive for a conventional loan. My question is, Can I roll over down payment and other closing costs into the loan if I have no down payment? Mentioned we can ’ t understand why a seller would do this if the purchaser and are! 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