FHA vs 5% Down Conventional – Which is better?

FHA vs 5% Down Conventional – Which is better?

As a Mortgage Planner my purpose is to help people navigate the options and benefits of loan programs.  For purchases, and especially 1st Time Buyers, this can be particularly daunting.  One of the most common questions I tackle is FHA vs 5% Down Conventional – Which is better?

Actually the answer can be complicated.  Each program offers unique advantages.  FHA for example has more flexible guidelines, sometimes becoming one’s only option to buy.  But, if you have the choice between the two the mathematical analysis becomes clear.   This chart shows a comparison based several comparisons.  The sample highlights the major differences between the programs.


Sample 350,000 Purchase    
  5% Down Conventional 3.5% Down FHA
Down Payment 17,500 12,250
Loan Amount 332,500 343,661
MI Pmnt 172 380
MI period 9yrs max Life of Loan
Aprox Rate 4.375 3.75
Initial Monthly Pmnt (Incl MI) 1832 1971
Over 30yrs paying min pmnt 616371 709,744


As you can see FHA has a couple clear advantages like lower down payment and lower rate.  However the lower interest rate is offset by the higher MI costs.  Also, the MI on FHA is for the life of the loan.  This increases the cost over time.  If you look at the last row the savings of a 5% down Conventional loan over a 30yr term is substantial.  However, as with every mortgage plan, the details are in What’s Important to You.  How long will you be in the home?  How important is payment vs money in the bank?

For a free analysis of your situation and to get a better idea of which program is best for you, email me now or call me at 858-273-3663.

Jeremy Beck
Mortgage Planner
Best Deal Seeker



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