FHA vs Conventional????????
I'm trying to purchase a house and everything so far has been more confusing than ever. My gross monthly income is $3,080. I have absolutely no debt in credit cards or auto loan. Everything has been paid off on time. Every house that I look into that is within my price range needs some work and most likely will not pass the FHA inspection since they are super strict. Will I qualify for a conventional loan and how much? I'm looking to purchase a house around 220-240 thousand with maximum 5% down.
- BobLv 68 years ago
FHA used to be more strict than conventional but that is no longer the case. If a home fails FHA standards it fails conventional standards too. Things like a worn carpet or a cracked window glass no longer require repairs with FHA unless they present safety issues, in which case conventional financing will require them to be fixed as well. With excellent credit, conventional financing will cost less because monthly PMI rates are lower compared to FHA and conventional does not require the one percent upfront mortgage insurance premium. With a credit score below 680 FHA will probably cost less because their PMI is not affected by credit score.
The PMI companies will limit your total monthly debt payments to $1386 (45% of your income) which will probably max out your purchase price in the $175-$180K range with 5% down. If you have enough in the bank to be considering 5% down on a $240K purchase you should have enough for a $180K purchase. With 5% down, conventional programs allow the seller to contribute up to 3% of the sale price toward your closing costs.
FHA has the 203K Rehab program if you decide to purchase a home and include repairs and/or improvements in one loan. Maximum financing will be a bit lower than conventional since the PMI costs are higher and allowances need to be made for the cost of repairs.Source(s): Licensed Loan Officer in Ohio
- godgedLv 78 years ago
Have you talked with a mortgage lender about what you can qualify for? It seems your price range a bit steep for your income.
For houses that need work, you negotiate lender required repairs. Also look at the FHA streamline loan.
USDA rural development loan also has guidelines on track with FHA guidelines, so that is not an "out" for you.Source(s): Oregon Realtor
- BillLv 78 years ago
With your salary you should be limited to a$150K-$175K mortgage range. With only 5% down including closing cost you will need an FHA or other type government guaranteed loan. Good luck
- Venita PeytonLv 68 years ago
If the house is in a rural area, it may qualify for a USDA loan (typically 100%). The website below will allow you to put each property in to see if it qualifies. Otherwise, the second website
below explains the difference between FHA and conventional.Source(s): http://eligibility.sc.egov.usda.gov/eligibility/we... http://www.fhainfo.com/fhavsconventional.htm
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- acermillLv 78 years ago
You are WAY out of your price range in looking for a house. I suggest that you sit down with a mortgage loan broker or banker to determine in what price range you should be looking.
- 8 years ago