Florida Mortgage Rates On Conventional Loans Versus FHA Loans

This BLOG On Florida Mortgage Rates On Conventional Loans Versus FHA Loans Was UPDATED On May 18, 2017

Florida mortgage rates on Conventional Loans versus FHA Loans are somewhat higher.

  • Current Florida Mortgage Rates On Conventional Loans are 0.50% higher than FHA Loans for borrowers with credit scores between 620 FICO and 680 FICO.  
  • Florida Mortgage Rates On Conventional Loans depends on borrowers credit scores.
  • Most mortgage applicants think that just because they qualify for Conventional Loans that FHA Loans is out of the picture and need to go with a Conventional Mortgage.
  • However, this may not be the best interest of the borrower. Home buyers who qualify for both Conventional and FHA Loans need to weigh the pros and cons of going with Conventional Loan Versus FHA Loan.
  • Florida Mortgage Rates On Conventional Loans is really bad for borrowers with credit scores under 640 FICO. 

How Are Florida Mortgage Rates On Conventional Loans Priced Versus FHA Loans

Fannie Mae and Freddie Mac set the requirements on Conventional Loans.

  • Conventional Loans are not guaranteed by the government like FHA Loans are.
  • HUD, the parent of the Federal Housing Administration (FHA), insures FHA Loans originated and funded by private mortgage lenders in the event if borrowers default on their FHA Loans and goes into foreclosure.
  • Due to this guarantee by FHA, private lenders can offer low mortgage interest rates on FHA Loans even though FHA borrowers only put 3.5% down payment. 
  • Private lenders have a sense of security with FHA Loans because as long as they follow FHA Guidelines, they know that they will be covered by FHA Insurance if the borrowers default on the FHA Loan they have originated and funded.
  • Florida Mortgage Rates On Conventional Loans is highly dependent on the risk the lender needs to take.
  • Since Conventional Loans are not insured by the federal government, pricing on Florida Mortgage Rates On Conventional Loans is highly dependent on the borrowers credit scores, type of property, and the amount of down payment Conventional loan borrowers put down on their home purchase.
  • Fannie Mae and Freddie Mac require all Conventional Loans with less than 20% equity to have private mortgage insurance.

Mortgage Insurance On Conventional Loans Versus FHA Loans

Mortgage Insurance on Conventional Loans is not mandatory if borrowers have at least 20% equity on their home purchase and/or refinance. Pricing on private mortgage insurance is set at a fixed factor like FHA Annual 0.85% Mortgage Insurance Premium.

Pricing on private mortgage insurance on Conventional Loans depends on the following factors:

  • Borrowers credit scores
  • The type of property
  • Loan To Value

FHA Mortgage Insurance Premium

FHA mortgage insurance premium is fixed no matter what the borrowers credit scores or loan to value is.

  • Every FHA Borrower pays the one time upfront FHA mortgage insurance premium of 1.75%
  • Annual FHA mortgage insurance premium is 0.85% for all FHA Borrowers on a 30 year fixed rate FHA Mortgage no matter what the borrowers credit scores are

Conventional Private Mortgage Insurance Requirement Versus FHA MIP

Fannie Mae and Freddie Mac does not require private mortgage insurance for the entire term of a conventional loan.

  • One of the main advantages of Conventional Loan Financing is that there is no mandatory monthly mortgage insurance for borrowers who put 20% down payment on home purchase.
  • Homeowners can request the elimination of private mortgage insurance if they think they have 20% or more equity.
  • An appraisal is required to determine the value of the property if homeowner is requesting elimination of private mortgage insurance.
  • Homeowners who are refinancing their homes with a conventional loan and have 20% or more equity, there is no private mortgage insurance that is required.
  • Private mortgage insurance is mandatory for homes with loan to values higher than 80% LTV.

No Upfront Mortgage Insurance Premium On Conventional Loans

FHA mortgage loan borrowers pay an upfront mortgage premium of 1.75% of the loan amount.

  • The upfront FHA MIP can be rolled into the balance of the FHA Loan.
  • FHA Borrowers also have an annual FHA mortgage insurance premium of 0.85% which homeowners need to pay for the term of the 30 year fixed rate mortgage on their FHA Loans.
  • The annual FHA MIP is amortized in 12 equal monthly payments and is part of the borrower’s monthly mortgage payment and is escrowed. 
  • FHA mortgage insurance cannot be cancelled with the new laws that will take into effect in June 2013. 
  • Even if your FHA mortgage falls below 78% loan to value, you are still stuck with paying mortgage insurance for the life of the loan. 
  • Florida Mortgage Rates On Conventional Loans are generally higher than FHA mortgage rates

 FHA Loans Versus Conventional Loans

FHA mortgages has many advantages and is a great program for those home buyers with prior bankruptcies and foreclosures.

  • Mortgage borrowers can qualify for a FHA mortgage loan with a prior bankruptcy as long as the bankruptcy has been discharged for at least two years. 
  • Fannie Mae and Freddie Mac has a four year waiting period for borrowers to qualify for Conventional Loans after a Chapter 7 Bankruptcy discharged date
  • Mortgage applicants can qualify for a FHA mortgage three years after the recorded date of foreclosure , deed in lieu of foreclosure, short sale. 
  • For Conventional Loans, a borrower needs to wait a minimum of 4 years after short sale and/or deed in lieu of foreclosure to qualify. 
  • There is a mandatory waiting period of four year to qualify for a conventional loan after a deed in lieu of foreclosure and/or short sale. 
  • The waiting period to qualify for conventional loans after a standard foreclosure is 7 years from the recorded date of the foreclosure. 
  • Minimum credit scores to qualify for a 3% down payment conventional loan is 620 FICO for first time home buyers and 5% down payment for a seasoned home buyer.
  • Fannie Mae and Freddie Mac consider first time home buyers as someone who did not have ownership on a home for at least three years.
  • Minimum credit scores required to qualify for a 3.5% down payment FHA insured mortgage loan is 580 FICO.
  • Home buyers can qualify for FHA Loans with credit scores under 580 FICO and down to 500 FICO if they put 10% down payment.
  • Prior bankruptcies, foreclosures, deed in lieu of foreclosures, short sale has nothing to do with mortgage rates and there is no pricing adjustments.

Mortgage Part Of Bankruptcy With Conventional Loans Versus FHA Loans

Home buyers who had mortgage or multiple mortgages as part of their Chapter 7 Bankruptcy can qualify for a conventional loan four years from the discharged date of their Chapter 7 Bankruptcy as long as the transfer of the deed to the property has been finalized.

  • What this means is that the waiting period starts from the discharged date of the Chapter 7 bankruptcy and the property that was included in the bankruptcy could have been finalized through foreclosure, deed in lieu of foreclosure, short sale after the discharged date and that has no impact on qualifying for a Conventional Loan.
  • This is not the case with FHA Loans. With FHA Loans, home buyers who had mortgage or mortgages as part of their Chapter 7 Bankruptcy, the waiting period is three years from the recorded date of the foreclosure, deed in lieu of foreclosure, or short sale which is after the discharged date of the Chapter 7 Bankruptcy.

Home Buyers interested in qualifying for mortgage loans and want to see what the best rates they are eligible for, please contact Gustan Cho at 800-900-8569 or text Gustan on his cell at 262-716-8151 or email us at gcho@gustancho.com.

Related> Conventional Loans

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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