PMI equals MIP

Some other important things I found out when debating a FHA vs. conventional mortgage:

If you are buying a condo, it must have 4 or more units. In a town filled with tripledeckers, this is problematic. You can try for MassHousing loans, but you can't make over $110K in the expensive counties. That eliminated us there.

My husband and I are buying a condo (in a tripledecker) with conventional mortgage financing because a) we have to because of the 4 or more condo rule, and b) because we know that even once we own 20% or more of our property MIP CANNOT be cancelled on a condo of any kind, shape, or form. That means, even if you own 99% of your condo you are still going to pay MIP on a FHA loan. Which means you'd have to refinance at some point and the interest rates will likely be higher down the road.

I think its worth to save up for conventional financing in this scenario even though PMI is more (in our case $100-150 more) a month because of the lower interest ratres you get with a conventional mortgage, the fact that you can drop PMI once you have enough ownership of the property, and there is much, much less hassle and rules surrounding FHA ownership. Because of the interest rate being lower on the conventional mortgage, we actually get about the same monthly payment. However, the fees for an FHA loan are discounted and those regulations might save a lot of people from making serious mistakes with the property (you can also get FHA construction loans).

The downpayment for an FHA loan is going up Jan. 1 to 3.5% and the upfront insurance costs are also going up as well effective the 1st.

All of a sudden, every broker and lender out there wants to do FHA loans - be careful! There are many starving mortgage people out there who are overnight FHA "experts". Yeah , right. "Oh yes, we do FHA loans!"....

...Yeah you and very other mortgage person that doesn't have other programs available...which is almost everyone.

Do your due diligence when deciding who to work with - ask questions such as,

"How long have you been in the business?"
"How long have you been doing FHA loans?"
"Are you a lender with Direct Endorsement from FHA?" (This means the lender themselves can underwrite, and endorse for insurance from FHA. If not, that means they have to send the loan out...somewhere...to get approved by a lender that is Direct Endorsed...time....delays...lack of control.....many are already experiencing this.

If you can't get a quality answer from the mortgage person...get a referral to somone who knows what they are doing.

FHA loans are good loans, but they need to be explained thoroughly. Like any loan program, it needs to make sense for the borrower, and that is a longer conversation than,

"You're putting down 5% or less and your fico score is xyz....you should get an FHA loan. "

The "overnight expert" on FHA is probably not the best place to get your FHA loan from.

Here is a handy link too for detailed answers to FHA questions:

faq.fha.gov

My wife and I are getting an FHA mortgage for a house in Stoughton. For us it's the 3% down and the friendly treatment of my wive's credit problems from the past. The down payment percentage basically means that the money gifted to us from the guests at our wedding is enough to get us into a house and out of our cramped one bedroom apartment we've been living together in for the past few years.

Sure the upfront 1.75% hurts a little, but overall we're getting a good deal for a nice house that we can afford. If we were not first time buyers and had a good amount of equity in our property, I'd probably look into another option though.