FHA vs. Conventional Home Loans?
What are the differences?
What are the obvious pros and cons of each?
- godgedLv 71 decade agoFavorite Answer
FHA requires a low down payment, 3% usually does it.
But with FHA, there are is an additional inspection, which is pretty picky. It is basically a thorough health and safety inspection. For homes in the lead based paint era, there can be no peeling paint, and if you have to paint the exterior, there can be no paint chips on the ground. Downspouts have to be pointing a certain length away from the house, window glazing has to be in place, it goes on and on. Items that conventional lenders wouldn't care about have to be rectified before an FHA loan will fund.
This can delay closing trying to get all the I's dotted, and some houses just won't pass underwriting for FHA. YOur lender can help you with things in a home that FHA won't fund.
Other than these things, they are mortgages.
Someone just informed me that not all areas require additional FHA inspections. I have a FHA transaction going right now, and it has been inspected for FHA compliance twice. So what I said about FHA inspections may not apply in all cases.Source(s): Oregon Realtor
- financing_loansLv 61 decade ago
I like Godgeds answers and gave her a thumbs up.
I will just add a few things.
FHA and Conventional you can do 3% loans on both. Rates will be cheaper on FHA.
FHA and CONV dont actually give you the money. Its just who insures your money. Its like buying a car and somebody saying if you wreck who picks up the pieces. They are only an insurance company, and like all insurance companies they have different pros and cons.
They are pretty much the same other then FHA does have more restrictions but have less closing costs.
Here is the kicker. FHA loans are assumable. They have to be a qualified assumption, meaning credit and income qualified. I have a borrower right now with a 4.5% interest rate on an FHA. The new home purchaser can take over that rate if they qualify. Guess how much the property of the home just went up? With rates at 7%. Can you imagine what people will pay for a 4.5%?
They have to qualify, but I have people refinancing just to be able to have that option in the future. In my opinion anybody that isnt on an FHA assumable loan right now that plans to sell in the next 5 years, are idiots.Source(s): 30 years mortgage real estate exp. FHA, VA, Conv trained underwriter.
- Anonymous4 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