FHA vs Conventional Happy Tuesday, and I hope you had a great weekend! I want to talk about FHA vs. Conventional and how we, as lenders, help clients decide which loan is best for them. I’ll keep it simple, practical, and focused on what moves deals forward. (Payment examples are at the bottom.) When you’re writing offers, choosing the right loan type can affect approval odds, appraisal/condition hurdles, seller perception, and long-term costs for your buyer. A wise choice up front saves time, stress, and money later. Our Rule of Thumb Lower credit / tighter DTI → FHA usually wins. FHA is more forgiving on credit and debt ratios and can price friendlier for mid-score borrowers. Higher credit (typically ~720+) → Conventional usually wins. Conventional has no upfront mortgage insurance and PMI that can drop off, which often makes the long-term cost lower even if the first month’s payment is a touch higher. Key Differences Down Payment FHA: 3.5% down; easier approval for mid/low credit. Conventional: 3% down (common for first-time buyer programs); favors stronger credit. Mortgage Insurance FHA: 1.75% upfront MIP (financed into the loan) plus monthly MIP that does not fall off with <10% down. Conventional: No upfront MI; monthly PMI can be removed at ~75% LTV after 2 years and 80% after 5 years. Credit & DTI Flexibility FHA: More forgiving on credit and often allows higher DTI via AUS. Conventional: Rewards higher credit with cheaper PMI, assuming stronger credit scores; DTI typically capped ~50% (AUS-dependent). Property & Appraisal FHA: Stricter property condition and condo approval rules. Conventional: Generally, more flexible, but not by a wide margin. Condos for FHA must be FHA approved, or you would have to get a spot approval! Conventional loans will need full condo review but are much easier to approve than an FHA Condo! Seller Credits FHA: Up to 6%. Conventional (<10% down): Typically 3% or less. How This Helps You Win Offer optics: Many sellers (fairly or not) prefer Conventional on perception. Fewer condition snags: Conventional can avoid FHA repair "gotchas." Future savings story: With Conventional, PMI can drop off, which is great for buyers expecting equity gains or future income growth. Conversation Starters You Can Use "FHA makes it easier to qualify if credit or DTI is tight." "FHA UFMIP is updated when you do a streamline refinance – that could cost you an additional 6-12K when you refinance your FHA loan. "Conventional can cost a bit more monthly today, but no upfront MI and removable PMI can lower total cost over time." "If values rise, we can re-appraise Conventional and remove PMI early with no refinance needed." Example Scenario - Monthly Payment Snapshot - rates subject to change - 780 credit score - income over 1st time buyer limit FHA - 3.5% Down @ 5.625% Loan Amount (with UFMIP): $741,325 Principal & Interest: $4,267 / mo Taxes (1.25%): $786 / mo Insurance (est.): $200 / mo Mortgage Insurance (0.75%): $455 / mo Total Monthly ≈ $5,709 Note: UFMIP (1.75%) is added to the loan; if the client refinances in ~1 year to another FHA, they'd pay ≈ $6,000 upfront MIP again. Conventional - 3% Down @ 6.49% Loan Amount: $732,350 Principal & Interest: $4,624 / mo Taxes (1.25%): $786 / mo Insurance (est.): $200 / mo PMI (0.26%): $159 / mo Total Monthly ≈ $5,769 Takeaway: In this case, FHA is ~$60/mo lower today, but for higher-credit buyers, Conventional often wins over time thanks to no upfront MI and PMI that can drop off. No Upfront PMI will reduce long-run cost without a refinance. How We Support You & Your Clients Speed & certainty: Clear needs lists and tight timelines. Smooth communication: Milestone updates you can forward. Lifetime Refinance Guarantee: If rates drop, your client can refi with no lender, escrow, or title fees through us, and you stay the hero long after closing. If you’ve got a buyer in mind, send me the basics (price, credit, income, property). I'll return a side-by-side with P&I, taxes, Insurance, MI, cash to close, and a 24-/60-month cost view you can share. Oh yeah, and one more thing! Please RSVP to Oktoberfest! Please let me know if you have any questions or if a client needs my guidance. I’m just a call, text, or email away. 📞 Direct Line: 661-291-2222 – Text OK 📞 Cell: 661-714-6258 – Text OK 📞 Office: 661-260-2970 ext. 2222 – Text OK 📧 Email: Mike@AugustaFinancial.com But wait, there’s more… Interest Rates Interest rates had a nice run on Friday and today, and we are starting to see the 10-year bond approach 4%. With the government shutdown, we are not seeing as much economic news, and the CPI for last month will be delayed a week or so. Loan Programs We do loans on Non-warrantable condos! We offer 12-day escrows for pre-approved buyers, including conventional FHA/Jumbo/Bridge loans. We provide loans in all 50 states, so call me with anything you need. Government loans (FHA/VA/USDA) are in the 5s. Conventional loans up to $806,500 are in the high 5’s and low 6s. High-balance loans from $806,501 to $1,209,750 are also in the 6s. Jumbo loans above $1,209,750 are in the 6’s. ARMS in the 5’s and some in the 6’s Bank statement loans are available with 10% down again, with larger down payments in the 6’s++. Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement! 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000. Private Money lenders offer Hard Money Loans with 35% down. No-Ratio Loans require a 30% down payment. DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down. Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go! 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates! Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits. **Good News for Condos:** NONE **Bad News for Condos*** Nothing New! CONDO HELP!!! If you have a listing or a buyer interested in a specific condo and are unsure whether it is warrantable or Non-warrantable, please call me, and we can look up Fannie’s list in real-time. I have already done that on three condos today, and my list was accurate on all 3. We don’t know when something has changed, and it would be impossible to track everything on a day-by-day basis, but we don’t mind looking up a few items each day. The full state of California’s naughty list has been added to: MikeMeena.com! See the link below: https://mikemeena.com/non-warrantable-condos/ Let me know if you hear anything new about condos or townhouses. I am available every day if you need anything. 📞 Direct Line: 661-291-2222 – Text OK 📞 Cell: 661-714-6258 – Text OK 📞 Office: 661-260-2970 ext. 2222 – Text OK 📧 Email: Mike@AugustaFinancial.com Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow! Mike Meena President | Loan Officer Click to Call or Text: (661) 714-6258 This entry has 0 replies Comments are closed.
