Differences Between FHA and Conventional Mortgages

Posted on February 7, 2018 · Posted in Connecticut FHA Mortgage, connecticut mortgage broker

There are many misconceptions about both FHA Home Loans and Conventional Mortgages.  Both are great loan programs with very similar rates – but there are some differences that many people are now aware of.

 

In the past FHA loans were generally considered to be used by First Time Home Buyers because they only require 3.5% down (this is due to the fact that these loans are insured by the Government in the event of default).  But, this is not really the case now.  FHA loans are used by people from every walk of life.  This is mostly due to the fact that FHA rates at times are better than Conventional rates – so many borrowers wish to take advantage of this.  Traditionally, FHA loans allow for higher Debt-to-Income Ratios than Conventional loans – which can allow for more buying power.  A downside to FHA loans, for many borrowers, is there is PMI on your loan – usually for the life of the loan.

 

In the past Conventional loans were generally considered to be for people that had at least 20% to put down on their home purchase.  This is not longer the case.  Conventional mortgages now allow for options such as 1% down, 3% down, and 5% down with Lender Paid PMI (meaning you don’t make a monthly PMI payment and it is paid in the rate you are given).  Many people still choose Conventional loans over FHA loans because at 78%-80% loan to value PMI will fall off the loan.

 

Here is a further overview of the both programs:

 

Conventional:

 

    • 660 Minimum credit score usually required

    • Max loan amount – $424,100

    • Minimum 5% down payment for No PMI Option

    • Stricter guidelines for Debt to Income Ratios

 

FHA:

 

  • As little as 3.5% down

  • Minimum credit score 600 (at lower scores you may need to put down more)

  • Loan Limits vary by the county you live in

  • Allows for higher Debt to Income Ratios

 

Please feel free to contact me today to discuss your loan options or if you have any questions about either loan program.

 

Thanks,

 

johnv_picJohn Vecchitto / Loan Officer
NMLS# 1127163
210 S. Main St. First Floor
Middletown, CT 06457
860-918-0251 (Cell)
860-788-7237 (Office Phone)
johnv@northeast-mortgage.com
Company NMLS 117273

 

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Apply for a Residential Mortgage Now: Click Here

 

NMLS# 117273, Northeast Financial, 860-788-7237

 

Borrower contributes 1% down, lender contributes 2% down of the loan up to $5,000.00 for the down payment, and the borrower is responsible for any difference to get the required 3% down. The principal and interest payment of a 200K 30 year Fixed Rate Loan at 4.375% and 97% loan to value is 998.57 with 0 points due at closing. The annual percentage rate is 4.633%. The principal and interest payment does not include property taxes and home insurance premiums, which can result in a higher actual monthly payment. Rates current as of 06/20/2017

 

NMLS# 117273, Northeast Financial, 860-788-7237

 

The principal and interest payment on a 200K 30 year Fixed Rate Loan at 4.375% and 97% loan to value is 998.57 with 0 points due at closing. The annual percentage rate is 4.433%. The principal and interest does not include taxes and home insurance premiums, which can result in a higher actual monthly payment. Rate current as of 06/20/2017