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I am thinking about buying my first home with a FHA mortgage because of the lower down payment. Does the FHA insurance make your payments significantly higher than a conventional mortage?

Am I better off saving up to $10,000 for a down payment? I'm tired of paying rent, I'd rather pay a mortgage if the amount isn't too much higher.

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  Answers  |  4

November 20, 2014


Great question...and yes, the FHA mortgage insurance does significantly increase the monthly payment. FHA mortgage insurance has steadily increased over the last several years to the point now, where even borrowers who are looking to refinance with an FHA loan into another FHA loan, are ineligible becasue the new payment is too high for there to be any benefit. This does not mean that it will not be a good choice, but there are alternatives. For example -

1) You could look at putting a little bit more money down; like 5% and depending on your credit score and other factors, the conventional PMI will be significantly lower than the FHA MI.

2) You could look at options with a conventional first mortgage and then a home equity line of credit behind that for the balance. A common scenario is 80/10/10 (would require 10% down payment)

3) If you are VA eligible, a VA loan does not have mortgage insurance and you may be eligible for up to 100% financing.

I hope the above information helps.

$commenter.renderDisplayableName() | 01.27.21 @ 16:32


December 02, 2014

Conventional loans are looking to go to 97% loans in order to compete directly with FHA. The monthly mortgage insurance on an FHA loan is higher but the rates are usually a good bit lower and there is usually rebate pricing to help you with closing costs on FHA. There are many reasons to use an FHA loan and many times it is the only loan that will work for someone. If you only look at the negatives of it and don't use it then you lose out and don't get to buy a house.

You should contact a mortgage professional in GA who can help you make this highly personal decision. There is definitely not a one size fits all answer on this one.

$commenter.renderDisplayableName() | 01.27.21 @ 16:32


February 02, 2015

FHA borrowers got a late Christmas present from HUD last month when they dropped the MIP (mortgage insurance premium) on FHA loans dramatically. Whether an FHA loan is better for your situation than a conforming loan depends on your scores (higher scores make conventional the smarter option), length of time since a bankruptcy or foreclosure, your debt to income ratios, your employment history, and your overall financial situation. Conforming loans are more difficult to qualify for. I write loans nationally, glad to help if you have further questions.

$commenter.renderDisplayableName() | 01.27.21 @ 16:32


June 14, 2016

Home affordability is all relative to your market area and your personal situation. Saving for a larger down payment is not always favorable, especially if you do not have any reserves for emergencies. Low down payment options such as FHA, Fannie Mae HomeReady, USDA and VA all provide home buyers options to buy before having 20% down payment in the bank. If you want more information, seek out a local mortgage professional who can review and discuss your specific situation.

$commenter.renderDisplayableName() | 01.27.21 @ 16:32