In the early 1990's FHA had about 15% of the home purchase market according to the Inman News. Until a couple of years ago, FHA lost business to the growing subprime market. Once the subprime market cratered, FHA is back in business offering appealing financing for home buyers since they accept lower credit scores than conventional loans and are more forgiving of past financial mistakes. Requiring only 3.5% downpayment is also a plus for first time homebuyers. FHA borrowers pay a monthly mortgage insurance premium (PMI) of .5% per year and an upfront premium of 1.75 percent, which is almost always included in the loan amount. In contrast, Conventional loans require larger downpayments than government backed loans. Interest rates are set by each lender and can exceed those of FHA and VA loans. However, lenders may allow some creative financing options for the Conventional buyer. And of course with the larger downpayment, the PMI disappears quicker once the 20% down is reached.

In short, when considering financing, there are many options. The right financing program may not be ONLY about the interest rate but about the entire package. Looking for a lender? I can help!

Labels: conventional, fha, home loans, Inman News, real estate