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? Thanks, Marci
this is ironic....i was going to post the same question...hope someone has the answer because I want to know too!
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.
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.
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.
Re: so it appears Thanks everyone, You all gave great answers. Thanks for the links, numnuts20! I bookmarked both of them. Marci
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.
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.