Loans, Liens & Listings- Season 2- Episode 4- FHA vs Conventional Financing. What is the difference?

Season 2 with Michael Romano of Contour Mortgage!

Welcome back everyone michael romano here bringing you another episode of our loans liens and listings podcasts john enriquez here exit family realty so what’s up nothing much man we just had uh lee friedman on and we were talking about just a lot of different stuff between liens itself and short sales and foreclosed properties but he did mention that if you’re an

Fha buyer or you’re a conventional home buyer you can purchase those properties as well what’s the difference between fha and conventional that’s an awesome question you get that we hear that all the times not many people they know they’ve heard of fha they’ve heard of conventional but they never really know what the difference is the primary difference is there’s fha

Is is helpful for people who make a little bit less income and their credit isn’t as good so there’s more lenient and flexible credit requirements for fha versus conventional all right there’s also a little bit more leniency in terms of your qualifying ratios so your debt to income ratio could be a little bit higher with an fha versus a conventional okay and then

The other major difference almost forgot three and a half percent down for fha five percent down for conventional low to the minimum so if you’re looking to save a little money on your down payment the fha loan might be a program that’s good and more geared to your needs all right and is that the less of a down payment i know um they talk about private mortgage

Insurance that’s an is that in both fha and conventional is that just an fha how does that work it is it’s in both so if you if you put down 20 on a conventional loan you don’t have to pay private mortgage insurance okay so any loan that you put less than 20 you have to pay private mortgage insurance with conventional after you get 20 equity in your house or if

You put the 20 down pmi will come off okay with fha even if you put 20 down on fha loan you still have to pay pmi for at least 11 years okay if you put less than 10 down you have to pay for the entirety of the loan okay so there’s 20 down fha loans also you could put 20 down fha sure really because i also i mean buyers usually always ask me if they go to fha it

Just predominantly means they’re three and a half percent down so so typically you don’t you don’t see as many people putting 20 down with fha but if you run into a situation you have you have the cash you have the money in the bank but you might have you know a credit score that’s less than stellar maybe a couple years ago you had some collections judgments missed

Payments whatever the case may be you might not have the credit to go conventional okay you know what i mean so that’s why if fha you know like i said you don’t see it as much but you can put twenty percent down on fha if you want to get to that but you still have to pay the pmi so that’s the downside got it but it does afford you with a little bit more leniency

And qualifying ratios is there an average payment on pmi like an estimated payment or depends on the loan amount yeah it depends on so many things it depends on the loan amount it depends on the person’s credit score the higher the credit score the better deal you get on the pmi okay debt your debt-to-income ratio also plays you know plays a role so if you have

A high debt to income ratio meaning that your total liabilities divided by your monthly income if that number is high you’re gonna have a higher pmi got it if that number’s low and you have great credit you’re gonna get you know one of the best premiums you can get on the pmi awesome all right so thanks again for watching again for any type of home financing needs

Whether it be fha conventional or 203k mike’s your guide definitely give them a call thank you john it was a pleasure as always my friend until next time

Transcribed from video
Loans, Liens & Listings- Season 2- Episode 4- FHA vs Conventional Financing. What is the difference? By Jonathan Enriquez