Los Angeles

[PAW]

Hi,

Does anyone know which is more beneficial when getting a mortgage loan of $500,000:

1. FHA Loan with 10% downpayment and paying PMI.

2. Standard Loan with 10% downpayment and paying PMI.

Any idea?

Thanks.

[UrbanNomadinLA]

A loan is a loan-- but there are more requirements and restrictions on the FHA loan. States have limits on what they will loan under FHA. CAlifornia is $625,000 I believe. Florida, for instance, is in the $400's.

[Goran_K]

I always say conventional over FHA no matter what the numbers look like. FHA is a government sub-prime mortage loan dispenser that is a failed institution in every way. They are becoming insolvent, and if people keep using them, we'll eventually have to bail them out with tax payer money. 

[Pasta]

Goran,

I think FHA will need a bailout even if no one ever used them again.

[Goran_K]

I think you may be right. 

FHA needs to be abolished. They should have a new program with limits of $250,000 depending on your credit worthiness (less credit worthy types would get less). 

[Nanomug]

@PAW - have your loan officer run the numbers for FHA and conventional using your financial information.  My guess is that FHA will be more costly overall because:

1. In additional to  monthly mortgage insurance FHA has an upfront mortgage insurance amount. Conventional does not have the upfront cost.

2. FHA requires that you paym monthly mortgage insurance for a minimum of 5 years AND MMI can be removed when the loan hits 78% ltv.  Conventional is typically 1 year and usually requires an appraisal.

[Bijan]

FHA PMI rate is about 1.2% of the loan

Conventional loan is 0.52%

So avoid FHA if you can.