Part 2: Why FHA Loans will still be the better choice for many homebuyers (and refinancers!)
In our previous article, Part 1: Why FHA Loans will still be the better choice for many homebuyers (and refinancers!), we compared the new FHA Mortgage Insurance premiums and compared the monthly cost to a 95% conforming loan with MI, and a 95% conforming loan with NO MI. While the monthly payment leads us to think that the conforming (or conventional) loans are now the best option, one size shoe does not fit all borrowers.
First let's compare and discuss the conforming loan options:
- MI is cancellable before 60 months if your property increases in value a sufficient amount Whereas FHA MIP is required for a minimum of 60 months before cancellation, regardless of property value growth.
- Rates are similar to FHA rates - so that is not a pro or a con.
- The conforming loan with no MI has the lowest overall payment of the 4 options.
- Require 5% down payment
- requires a 680 fico score
- requires a debt ratio of 41% or lower
Benefits of the FHA Loan option (3.5% downpayment):
- Low downpayment required - 3.5%
- Down payment can be from Gift Funds
- lower ficos required (We offer FHA Loans down to a 580 middle score).
- FHA allows higher debt ratios, up to 50%
- FHA allows non-occupant co-borrowers such as parents helping their kids get a start
As you can see, one shoe doesn't fit everyone, and every borrower's finances and goals are a little different. Let us work with you to find the most suitable loan option to meet your needs, for now and the future. Contact VanDyk Mortgage direct at 760-752-4480, ask for Brian Skaar.
Please view the following articles for more information on comparing the old and new FHA MIP premium structures, and how they effect you: