However, ongoing mortgage insurance is required for conventional loans where the borrower has made a down payment o… Neither loan allows you to roll closing costs into the loan. This premium is refundable on a prorated basis but, the formula that is used to calculate it is stored in the same warehouse that Indiana Jones keeps his worldly treasures. That’s where FHA loans offer a hidden benefit not available with conventional loans: the ability for the next buyer to assume the existing FHA mortgage. In addition to the possibility of paying PMI on a conventional loan, refinancing comes with closing costs, which can add up considerably. Also, FHA charges an up front mortgage insurance premium (MIP). Closing costs are not a major factor because they are similar for both loans unless you count the upfront mortgage insurance premium charged by FHA. If you are considering taking out an FHA mortgage I advise you to look at your good faith estimate carefully. You must be a first-time home buyer, though you qualify for this as long as you haven’t owned real estate property in the last three years. Borrowers must have a debt-to-income ratio of less than 45%. Whether you’re purchasing a starter home or your dream home, smart buyers will look to the future and whether a property has resale value. It is just that not many In all fairness, most lenders don't fleece their customers like this, however some do. Conventional Loans: An Overview . Both FHA and conventional mortgages have more options than just the standard 30-year fixed-rate mortgage. Fannie and Freddie started out as a government charter but privatized over a decade ago. FHA looks at the property, the income, the job stability and the overall responsibility the borrower has exercised in the last year. Conventional loans – 3%; FHA loans- 6% . Up to 6% Seller contributions towards the buyer’s closing costs. The most important reason is that FHA is not a credit score driven product. You must be employed and have an income history of at least two years. Closing costs will be about the same for both loans, if you don’t count the upfront mortgage insurance required by FHA (the cost of which I included in overall numbers in the above comparison chart). This is a one time, lump sum that is added on top of your loan. The best 30 year. With the exception of your lawyer fees, which will be charged based on hourly services, your fees will generally reflect a percentage of the overall sale price. FHA Closing Costs FAQ. Borrowers with credit scores between 500 and 579 are also eligible for an FHA loan, though these loans require a 10% down payment. The minimum credit score required is 500; however, only borrowers with a credit score of 580 or higher qualify for the lowest (3.5%) down payment option. That means that as interest rates increase, your FHA loan makes your home a much more attractive option. Of course there are more guidelines, but you get my point. 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