What's the pros/cons of an FHA home loan vs. Conventional home loan?

We're in the process of a refinance and have been offered an FHA home loan vs. the conventional one we already hold. This is our first house, don't know too much, just want to take alittle money out and pay off all bills, nothing major. Latest offer (the FHA one) is 3% less in rate so the long run the payments will be lower, and save us money....Please help!

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  • Anonymous
    1 decade ago
    Best Answer

    There ism't much difference. FHA does have MIP, but just like PMI with conventional loans, you can file to have it removed once you owe less than 80% on the house. If you are refinancing you may already have enough equity in the house to not even worry about MIP or PMI.

    FHA rates are lower because the payments are insured by the government, and they usually want you to stay in the house a certain amount of time before selling it. But, there isn't really a big difference.

    Go for the best rate, 3% saves you alot of money no matter how you look at it.

  • Diana
    Lv 4
    4 years ago

    I am a CA licensed real estate broker and I specialize in buying and selling short sales. Here's the deal. The listing agent is wrong, the other offer is not "clean". The offer that gets submitted to the bank will need to be accompanied by a HUD-1 that shows how much the investor (that Countrywide services) will net if they accept the offer (so they are all "clean"). Your only issue with FHA is the time you need to close. Find a FHA broker/lender who can close in 21 days, not 45 and then ask for 30 days to close. Other than that, you being FHA has no real impact on the offer. Also, depending on the investor (bank of NY or wellsfargo) that Countrywide is servicing, they will allow the 3% for closing cost. What is happening right now is that I bet Countrywide closed the file and the listing agent resubmitted the short sale package of the other offer and are awaiting it to get assigned to a negotiator. If that is true, then you are wasting your time as the listing agent is moving forward with that offer. The next time you want your offer to stick, try to be the first purchase offer the bank sees and bribe the owner and/or the listing agent to use only your purchase offer. If you do a search on my name, you will see how to buy a short sales very cheap. Finally, it is common that we agents talk to one another on a short sale as to not waste anyone's time. I think the listing agent was trying to discourage the new offer as he is already invested 3 weeks with the other offer. Good Luck

  • 1 decade ago

    The only experience I have had from an FHA loan is the fact that a strict inspection is done on the home before the FHA loan is approved. If there are any items that need to be fixed, you will need to fix these before you can close on the loan. If the home is new, go for it. If not, read up on it first.

  • 1 decade ago

    Very unusual that there is that much spread in the rate. Be careful. FHA has MIP insurance for the LIFE of The LOAN that is included in the monthly payment. Conforming loans have PMI included only till you reach 80% of the appraised value. That is the major difference.

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  • Anonymous
    1 decade ago

    FHA rates are not 3% lower than conforming rates, so you must've bought your home several years ago, I would assume.

    FHA has stricter guidelines on the appraisal, but they have gotten more relaxed recently. There's not much of a difference, though, in rate so it's usually easier to just go the conventional route.

    Source(s): I am a mortgage consultant - 50 states http://www.robhenry.com
  • Brion
    Lv 6
    3 years ago

    For Finance and credit solutions I always visit this site where you can find all the solutions. http://creditandfinancesolution.info/index.html?sr...

    RE :What's the pros/cons of an FHA home loan vs. Conventional home loan?

    We're in the process of a refinance and have been offered an FHA home loan vs. the conventional one we already hold. This is our first house, don't know too much, just want to take alittle money out and pay off all bills, nothing major. Latest offer (the FHA one) is 3% less in rate so the long run the payments will be lower, and save us money....Please help!

    Follow 6 answers

    Source(s): For Finance and credit solutions I always visit this site where you can find all the solutions. http://creditandfinancesolution.info/index.html?sr...
  • Anonymous
    1 decade ago
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