Is An FHA Mortgage Better Than A Conforming Mortgage?

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Real Estate Agent with Realty One Group

Many think that an FHA mortgage is, by definition, better than a conforming mortgage. The correct answer is, "it depends." This brief blog post contains the vital information you need to make a decision if faced with choosing one or the other.

Original content by Mark Taylor Mortgages 207897nmls# DOC#207897


FHA vs Conforming Mortgage Rates 2005-2011

Is An FHA Mortgage Better Than A Conforming One?

The FHA is insuring a greater percentage of loans than during any time in recent history. In 2006, it insured roughly 5 percent of the purchase mortgage market. Today, it insures one-quarter. ”Going FHA” is more common than ever before — but is it better?

The answer — like most things in mortgage — depends on your circumstance.

Like its conforming counterpart, an FHA-insured mortgage is available as a fixed-rate loan and as an adjustable-rate one. Payments are made monthly and come without prepayment penalties.

That’s where the similarities end, however, and decision-making begins. For homeowners and buyers across Scottsdale , FHA mortgages carry a different set rules as compared to conforming loans through Fannie Mae or Freddie Mac that can render them more — or less — attractive for financing.

For example:

  • FHA mortgages can be assumed by a subsequent buyer. Conforming loans may not.
  • FHA mortgages require mortgage insurance, regardless of downpayment. Conforming loans do not.
  • FHA mortgages do not have loan-level pricing adjustment. Conforming loans do.

FHA mortgages also require smaller downpayment requirements versus a comparable conforming mortgage. FHA calls for a minimum downpayment of 3.5%. Conforming mortgages often require 5 percent or more.

And, lastly, FHA mortgages are priced differently from conforming ones. Since 2005, the average FHA mortgage rate has been below the average conforming mortgage rate more than 50% of the time, meaning that an FHA mortgage’s principal + interest payment is lower than a comparable Fannie/Freddie loan.

Today, conforming mortgage rates are lower. Dependant on each borrowers circumstances and loa-leveling adjustments.

So, which is better — FHA loans or conforming ones? Like most things in mortgage, it depends. FHA-insured loans can be big money-savers or money-wasters. To find out which is best for you, ask your loan officer for today’s market interest rates and study the results.

With less than 20% equity, the answer is often clear check out www.fhaarizona.net


This Active Rain post is by Mark Taylor, to get your free approval please call 602-361-0707. Please click on the links below to view my AWESOME websites!

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Tony is a full-time Realtor in Glendale, Arizona and is an exclusive buyer’s representative. He serves primarily the northern Metro Phoenix area. Tony got his start in the industry working as a messenger for a land developer in the 70’s while a student in southern California. Since then he has amassed a great deal of knowledge about the profession having worked in sales on both the commercial and residential sides of the business. Tony has also studied the industry from an academic perspective for use in his other job as a professor of management at a local university.

Tony holds a BA from the University of California, Irvine and a Masters degree from Arizona State University. He lives in Phoenix with his wife of 29 years and four children. He enjoys boating, reading, and travel. He and his family are also active in their church.

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