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FHA Mortgages

Posted on January 15, 2016 by Deana Manzanares (NMLS #1286808).

These past few days I’ve received an increase of calls asking about FHA mortgages. After further discussion I find out they are looking at FHA because they thought that was their only option because they didn’t have 20% to put down.  I felt that because I have seen an increase of calls on this subject, it was necessary to address. Purchasing with 20% down it typically not the norm nowadays, especially for first time home buyers.  Back in the day when home prices were much lower and when the market was very different this may have been the norm, oh how times have changed.  Most buyers don’t have 20% to put down on a home purchase and is seems that there is a very common misconception happening, that in order to purchase with a Conventional loan you need to have 20% down.  This is completely incorrect!

You can get a Conventional mortgage with as little as 3% down.  The main thing to understand is that even if you can purchase with as little as 3% down it may not necessarily be the best loan option for you.  The key thing to remember is that when you purchase a home with less than 20% down you will have mortgage insurance (MI).   With a conventional loan the rates are heavily dependent on your credit score (FICO), including the MI rate.  There are other factors that go into place but the key criteria in determining your rate is your FICO score.  It may end up that FHA may still be a more suitable option but it helps to know you have options.  Also CHFA offers a great loan program that is 3% down, Conventional mortgage with NO MI, but must have a 680 minimum FICO, it is the CHFA Advantage program.  Your lender should be able to help you see the differences and explain, then work through it with you to see what options are best.

If you are looking to purchase and you where informed or directed to go FHA only because you don’t have 20% to put down then I highly suggest searching a lender who is capable of doing both FHA and Conventional loans so when looking to get pre-approved you can review both options and see what will make the best sense for you. The only way I would not look into a Conventional loan is if you have a lower FICO score because FHA may actually costs less then a Conventional (rates & MI) loan.

Please contact us if you would like to learn more and/or if you have any questions.

 

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