FHA or 5% Conventional

My suggestion would be to go Conventional, and here's why... After one year, you can have the home appraised, and if you have 20% equity or more, you can have the PMI dropped. With FHA, you will pay MI for a minimum of 5 years.. no exception... and there's no guarantee that they will drop the MI... it is not automatic.. I have clients here in AZ where they have paid MI on their loans for 7 years, and FHA will not drop it.. with FHA they are supposed to drop it when you pay down your mortgage to 78% of the original loan amount, but somewhere in the small print, they state that it has to be approved... meaning it's not a guarantee they will drop it.. Also, with conventional, it's possible to pay a onetime payment upfront for mortgage insurance, and you won't have to pay monthly.. And, some lenders allow you to finance that up front premium just like FHA... If you're dealing with a competent loan officer, he should be able to show you all these options.. if you're dealing with the local big bank, it's likely they don't offer this type of product, or the loan officer/application assistant isn't aware of such a product.. so The best advice I can give you is to contact a LOCAL mortgage broker, not the local "Big" bank, and certainly not one of those 50 states internet lenders...By applying with your LOCAL Broker, you have an advantage because he's familiar with local customs and works with numerous lenders, seeking out the best loan terms for your particular scenario. Because he has lower overhead, he can offer you lower rates and lower fees than most of the larger lenders.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

If you have the 5%, and are OK with the 5% down payment, conventional is the way to go. There is another conventional option you haven't mentioned that is even better. It is 5% down conventional WITHOUT monthly PMI. Contact a local licensed loan officer, and ask them about a one time up-front single premium option. If they don't instantly know what you are talking about, hang up and call someone else. We do these all the time and every client takes it, usually saying "How come no one else talked to me about this option!" In MN or WI, visit www.MortgagesUnlimited.biz

Hi DRF016,I agree with William's answer as he covered all the points I would, especially about using lender paid mortgage insurance on conventional. What I would like to add is that the average mortgage lasts for 4.9 years. You may purchase a new home down the road, refinance or maybe not. However, the majority of people do. So when you are factoring costs please really consider how long you will be in your new home. If you could move or refinance in less than 30 years you must factor that into your savings model.Wishing you all my best,Don LaPlumePS I serve the MA, NH, VT region in person and would be happy to assist anyone you know in this area. www.mortgageprofessordon.com

LETS CUT TO THE CHASE: FHA Why? Think of all the "potentials" you pointed out. There may be some "potential" pluses going conventional but are willing to gamble your money, your home, your families roof on "potentials?" And is a "potential" year or so difference in payoff in 30 worthy to maybe versus a defined line in this case. You have done the math and you know the answer and you see the difference and you are telling us but are you telling you? Run the numbers through our calculator http://tiny.cc/bfoms ... And feel free to contact us.

You are the only one that can really answer this question. There are a lot of factors, how long do you think you will be in this home, is the county appraisal/assessment higher than what an actual appraisal would be that you would have to have done a year from now. It would definitely be a gamble. All the best, Michelle

I have several clients that we offer a single premium payment of around 2% and the pmi is paid off no monthly at all. With FHA upfront MIP now at 1.75% it is about the same with no monthly. Then we advise our clients to take the pmi monthly savings and make additional principal payments. This will pay the loan off faster saving you thousands of dollars in compounding interest. If you would like for a detailed analysis email me at dsauerwein@usa-mortgage.com

Gun to my head conventional and shop for a rate lower than 4% with someone from our panel, a lot of good people hear

FHA....What everyone here failed to mention is that even though you can get a conventional approval up to a 95% LTV, that approval will CONDITIONED upon you ability to OBTAIN the PMI. This means that not only will your loan have to be underwritten by the lender, it will also have to undergo a separate underwriting process by the PMI compnay. Since they are a private company, they are under NO OBLIGATION to write the insurance policy. In addition, the rate you are being given is probably coming off a STANDARD rate card issued by the PMI compnay. If there is anything about the loan, value, credit, etc. they discover that they "dont like" the rate can change or the PMI denied. FHA is the safer bet.

The FHA interest rate will likely be a little lower and also the aproval process much smoother and (with out a review appraisal) . Yes, FHA monthly MIP is required, but can be disputed after 5 years and an equity position of 22%. Good Luck.Ken Baltes