Mortgage Expert John Veenstra: Conventional and an FHA Mortgages

24 Aug 2018 | 04:13

All approved CONVENTIONAL loans would be FHA approved also. Many approved FHA loans would not be approved as CONVENTIONAL loans. CONVENTIONAL is usually the better choice, if you have a choice. If you are qualified to get either CONVENTIONAL or FHA, why get FHA:
1. Refinances: if you need the money, FHA allows cash out to 85% of the house value. Conventional loans allow only up to 80% of value and 75% for 2 to 4 family.
2. Purchases: the monthly payment may be lower; this happens when credit scores drop further
And further below 740 down to 620, and, especially of down payment is under 10% or Property is 2 to 4 family. Other than the conventional Community lending program, rates and PMI increase as the credit score drops, making the monthly payment higher for conventional.
What are the “Pros” for an FHA Mortgage—When It is the Only Choice
1. Higher debt ratios are allowed with FHA loans
2. The minimum down payment is low, 3.5%
3. Income is too high & the property is not in a No Income Limit census tract for the conventional Community Lending program
4. The property is 2 to 4 family and the down payment is under 20% and the Borrower or the property is not eligible for the conventional Community Lending program
5. Due to blemished credit history, FHA will approves loans that conventional will not
6. The Buyer can ask the Seller to pay back up to 6% of the Purchase Price and that can be used to pay closing costs.
7. FHA mortgages allow cash out refinances up to 85% of the value of the house
What are the “Cons” for an FHA Mortgage:
1. Sometimes Sellers refuse to sell to Buyers getting an FHA mortgage
2. Sometimes Buyers simply refuse to get an FHA mortgage
3. The Monthly Insurance Premium (MIP)(same as PMI) cannot be discontinued
4. In addition to MIP, FHA also has an Up Front Mortgage Insurance Premium (UFMIP)
I would suggest that if your only option is an FHA mortgage and you want to own a home, do it.You do not have to keep the same house or the same mortgage forever. It is easier to buy the next home when you already own a home. It could be the stepping stone.

John Veenstra
Mortgage Loan Officer, NMLS #178140
41 Grand Avenue, River Edge, NJ 07661
201-833-0123 Ext 278
Cell: 973-809-8786