Flower Mound & Lewisville FHA Facts

Flower Mound and Lewisville Home Buyers:  When to go FHA?

Many of the home buyers I work with in Flower Mound and Lewisville ask a very similar question, “When is the right time to use FHA when Conventional today has a low down payment loan too?”.  It is still a common misconception that FHA is the only low down payment option.  There is a conventional loan product that allows for only a 3% down payment, which is less than the 3.5% FHA carries.

Credit: The 2 Reasons to use  FHA over Conventional

1. Credit– If you are looking for a loan program with the lowest of down payments, and your credit scores are marginal vs good (700+), you will likely find that conventional rates are affected more by credit score than FHA…not to say FHA isn’t, but conventional is much more.  Even more important, the cost of mortgage insurance is more on  conventional when your credit score is worse, whereas on FHA the mortgage insurance stays constant (Mortgage Insurance is a premium you the borrower pay that provides insurance to the lender in case you default on your loan).  Reminder, FHA mortgage insurance does not fall off.
2. Credit– Simply put, FHA allows a lower credit score minimum than Conventional.  If your scores are really low, you may not have the option to go Conventional.
3. Seller Contribution– Seller contribution is the only other common factor that is discussed when deciding between the two programs.  In today’s seller’s market, at least in Flower Mound, Lewisville, and the suburbs surrounding the entire Dallas Fort Worth metroplex, finding a seller willing to contribute to help pay the buyer’s closing costs is not very common.  On the other hand, the market will not always be like this.  FHA allows the seller to pay 6% seller contribution, while the conventional program only allows 3%.

Know the Difference Between FHA and Conventional Mortgages

Call me today to get preapproved for your mortgage, FHA or Conventional, and if you have more questions about this, we can discuss this until you understand it clearly.  Please consider subscribing to my blog by putting your email into the subscribe area in the top right.  You will not get junk mail from me, and will only be notified when I write new posts.