conventional v. FHA?

Discussion in 'Credit Talk' started by marci, Apr 12, 2001.

  1. marci

    marci Well-Known Member

    Hi all,

    I will be ready to do some house hunting of my own in a couple of years. In the
    meantime, I've begun gathering information about credit requirements, loan types,
    and the general house buying/negotiation process.

    One thing that I don't quite understand: if the FHA loans are generally more
    flexible re credit requirements, then why would anyone want a conventional
    loan? Since the goverment buys conventional loans on the secondary market
    anyway, why just not go with the government in the first place? Are there
    differences re down payment programs or points? Are FHAs only for certain
    demographic groups?

    In other words, what are the pros and cons of conventional and FHA loans? If you
    had perfect credit and had your choice, which would you choose - and why?


  2. Shelby

    Shelby Well-Known Member

    this is ironic....i was going to post the same question...hope someone has the answer because I want to know too!
  3. Momof3

    Momof3 Well-Known Member

    so it appears

    That FHA gives you more borrowing power? I entered my figures, FHA loan amount 84K, coventional loan 39K!!! gosh I couldn't even buy an outhouse for that price lol.
  4. me

    me Well-Known Member

    Re: so it appears

    In my opinion, the 2 big disadvantages for an FHA loan are:
    1) You are required to pay a 2.25% Insurance Premium at closing (On a $200000 house, that is over $4000!)... and 2) There are limits to the amount of the loan that an FHA backed loan can have which is different for each locality.
  5. Momof3

    Momof3 Well-Known Member

    Re: so it appears

    One of the good points of FHA, is that they don't require cash reserves, where most conventional programs want you to have 2 months of monthly expenses in the bank after closing.
  6. marci

    marci Well-Known Member

    Re: so it appears

    Thanks everyone,

    You all gave great answers. Thanks for the links, numnuts20! I bookmarked
    both of them.

  7. ShyGuy

    ShyGuy Well-Known Member

    FHA limits a con?

    While the FHA loans seem to be a no-brainer, am I the only one who worries about the limits in an area where housing prices are unreal (i.e., Tristate region, Bay Area, etc.)? I looked at the loan limits and then at the prices of houses where I live, and the two don't seem to match.
  8. Momof3

    Momof3 Well-Known Member

    Re: FHA limits a con?

    Not only the prices, but the standards on the houses, must meet FHA approval.

    Funny a few weeks back I contacted a local realtor about a few properties we might have interested in, I asked if they meet FHA guidelines and was told NO on all 6 properties, I then asked were these "dumps" fixer uppers and was told no. Not really sure, but that slims the margin in my area a bit.

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