By Timmy Rail of Citybrook Corp.; NMLS I.D. #: 12812
As a homebuyer in today's marketplace, one should be aware of all mortgage programs that are available to a borrower. The first step in the home-buying process should be getting "pre-qualified" by a seasoned mortgage loan officer that can assist in showing you all of your available options and answering all of your questions. Today, we focus on a comparison of a Conventional mortgage versus an FHA mortgage and emphasize the benefits of the Conventional loan. On a 1-family unit, a borrower can obtain a Conventional mortgage with 5% down. Assuming a 760 FICO score, let's compare a Conventional mortgage versus an FHA mortgage at today's interest rates:
- As evidenced above, although FHA rates are lower, and more attractive to a borrower, the Conventional mortgage is the "healthier" option. Additionally, the "pmi" on a Conventional mortgage will be eligible to be removed in the future, where with the 5% down-payment, HUD recently announced that the FHA "pmi" will remain for the life of the loan.
- The proposed payment shows as $147 per month cheaper on the Conventional loan, no "up-front mortgage insurance premium" charged and a chance to remove the "pmi" in the future.