Perception versus Reality

Quick note- full article on this topic coming sometime soon.

I just needed to vent on this particular topic.

A 5% down ‘conventional’ loan, which carries Private Mortgage Insurance (PMI), is no easier to get than 3.5% down FHA loan, which caries Mortgage Insurance (MI).

I’m getting a little sick of Realtors suggesting to their sellers that they should not take FHA offers seriously.  In some rare cases, like a condo project not being able to obtain FHA financing, a low money down conventional loan with PMI might be a good fix.  However, on a High Balance Conforming loan (loan amounts between $417,001 – $729,570) , FHA rates are slightly better than conventional pricing with PMI and may be the only product available.

Furthermore, FHA underwriters generally approve the loan and the mortgage insurance simultaneously without any need for further review or underwriting.  On a low money down ‘conventional’ loan with PMI, there are two levels of underwriting… the loan underwriter, and then again with the PMI company.  This extra level of scrutiny can delay the close of escrow and in some instances even kill a deal at the 11th hour.

There are some cost saving components that accompany a conventional loan versus an FHA loan; however, sellers and listing agents should not be avoiding FHA offers form qualified buyers.

As Always, if you have questions, please email me at TrustYourLender@gmail.com