Need help with comparing FHA vs Conventional loan. I have 10% for down payment.?
I will put 10% down on a home with the purchase price of 225K. I can chose either a 30 yr 4% fixed interest loan, or another lender is offering me a conventional 30 yr fixed 5% interest loan. With the conventional, Im allowing the lender to buy off the PMI, but in exchange suffer the higher interest rate (5%). The monthly breakdown is that with the conventional loan, my payment is lower about $100 as compared to if I were to go with the FHA loan because I would have to pay the PMI. In the long run, would I be paying more if I go with the conventional loan? How do I calculate how much I will be paying in the long run to compare the two loans? Can someone please break this down for me to understand? Also with the FHA, if I put down 10% now, how long do I keep having to pay the PMI on a monthly basis, before I stop paying it? I understand you have to build 20% equity, so since I am putting down $25,500, do I have to keep paying my mortgage monthly (approximately $1000 month) until I reach $45,000?
My Credit score is Excellent (790). Debt to Ratio is low, I only have school loan of $160 each month.
- ?Lv 78 years agoBest Answer
First off the FHA Loan has Stricter inspection and appraisal then a conventional. Example FHA mortgage is disapproved if the house needs the windows painted. Conventional would approve your mortgage.
Yes you pay PMI till you reach 20% Equity. Take the 30 yr conventional with the lender paying off the PMI.
This way months you have extra money you can put toward the principle and pay mortgage off in 20 yrs or lease.