FHA is a little more expensive due to the upfront mortgage insurance premium but in the right scenario it can be a cheaper alternative overall.
Here is what I mean.
Lets say you have a 620 mid score.
FHA - 250K with 3.5% down = $241,250 @ 5% = monthly payment of $1,317.74 + mortgage insurance of $100.52 per month
Conventional - 250K with 5% down =$237,500 @ 6.375% = monthly payment of 1481.69 + mortgage insurance of $336.46 per month
If you 720+ scores and can put 10-20% down then a conventional will probably be a better option for you.
You can put down as much as you want on an FHA loan but unless you do a 15 year fixed (there is no monthly mi if you are at 89.99% or less) you will pay mortgage insurance no matter how much you put down.
Some other benefits to FHA loans
Streamlined refinance option - you can refi without the normal qualifying process. No need to provide credit, income, assets or appraisal.
FHA loans may be assumable.
I'm a mortgage banker/broker
· 1 decade ago