FHA v. Conventional Loans

When shopping for a home loan there are many factors to evaluate to determine which is the right loan for you.  Our experienced Mortgage Brokers will ask simple questions to get you on the right path. Some questions you might have are, “What loan should I apply for?” or  “Which is the better loan?”  If you can qualify for both, the conventional loan is the better loan.

Although the FHA loan only requires 3.5% down payment, it has mandatory mortgage insurance, both up-front mortgage insurance and monthly mortgage insurance.  The mortgage insurance stays with the loan for the life of the loan.  The up-front mortgage insurance is usually added onto the loan amount and amortized over the life of the loan.  The monthly mortgage insurance is paid in addition to the principal and interest payment on the loan.  A FHA loan is only available up to a loan amount of $331,760 for a single family residence (in Maricopa county).

Mortgage insurance is not needed on a conventional loan if there is at least 20% equity in the property.  If there is less than 20% equity, the mortgage insurance may be paid either up-front or monthly, but not both.  Also, the amount of mortgage insurance is typically less than the amount on a FHA loan.  You can request it to be removed once you have 20% equity in the home.  You can get a conventional loan up to $510,400, with a minimum of a 5% down payment.

Here is a simple chart summarizing the above:

 

FHA

v.

Conventional

Loan Limit

$331,760 (in Maricopa County, limit can vary by county)

 

$510,400

Mortgage Insurance

Up-front and monthly, stays on for the life of the loan; typically higher than conventional loan

 

Can be up-front or monthly, only needed if less than 20% equity in the home.  Can request it to be removed once there is 20% equity

Minimum Down Payment

3.5% of the sales price

 

5% of the sales price

When shopping for the best mortgage broker in Arizona, you need to know the history of the company and their mortgage brokers.  AtCounsel Mortgage Group, LLC, founded by an experienced CPA and attorney, we have closed hundreds of loans over the years and specialize in assisting you to obtain the right loan.  Check out our experienced mortgage brokers and give us a call today or contact us.  We look forward to working with you!