Conventional loan vs FHA loan?

With the conventional loan we were offered 7.8% interest rate with 10% down.

With the FHA loan we were offered 7% interest rate with 5% down.

Which would you choose? The lower rate or the 'conventional' loan?

(BTW both are 30 year fixed rate)

Take the FHA loan, and put 10% down instead of the required 5%. Yes, you can do that.

Even though FHA charges PMI, your payment will be cheapter than the 7.8% interest...ALOT cheaper.

FHA loans are easier to get than conventional loans and have more relaxed guidelines. Be sure to deal with someone that is familiar with FHA loans...loan officers that say they are difficult loans, just doesn't know how to put one together.

Once you learn, they are no big deal and work NO DIFFERENT than any other loan.

PS: There is NO REASON why an FHA loan will "fall through" at the last minute unless you are dealing with an incompetent lender. Source(s): see my profile for full list...I used to underwrite FHA loans for YEARS

Choose the lower rate. You can put as much down as you want and you can make payments as high as you want.
Both sound good but there are restrictions with both FHA and coventional. I would say go Conventional because FHA guidelines can be tough and may fall through at the last minute. That happens with conventional as well but the Underwriter has more to work with.
16 yrs real estate
It really depends on your current financial situation, and future as well as credit history. The more you put down in theory the more equity you have in the property. What will .8% mean in payment or dollars each year and is that enough to make you choose the lower rate? Only you can decide. In today's market, either way depends on your financial situation. Realtor 20 years
FHA loans are NOT score based but use your last 2 years credit, employment and rental history. You MUST not have any lates at all in the previous 24 month period. Additionally, no bankruptcies in the past 4 years.

FHA programs the property MUST pass an inspection as well. Older homes may not pass (roof must have 5 years life left etc) Your lender should explain ALL of this to you.

With the lower down payment you MIP (mortgage insurance premium) requirement will be higher that is you put more money down 10%. So in theroy, the lower interest rate may cost you more monthly.

Make yourlender show you side by side BOTH programs. Then evaluate your savings and monthly costs - pick the loan that best FITS YOU.

Hope this helps.