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FHA or Conventional

Mortgages guaranteed by the Federal Housing Authority, or FHA loans, have been incredible for homeowners, especially for first-time homebuyers. Lower down payments and friendly interest rates make FHA loans very attractive for buying a house, but they can cause buyers headaches for years after purchase. Conventional mortgages are still some of the most popular loans available, but they do have some higher barriers to entry when purchasing a home. However, just because you start with an FHA loan doesn’t mean you have to keep it. Refinancing an FHA loan to a conventional mortgage can save you thousands of dollars over the life of your loan.

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Lose the Mortgage Insurance

FHA loans have always required Mortgage Insurance Premiums to provide protection against default. However, new FHA rules in 2013 and 2014 have made MIP a much greater burden for new buyers. According to Forbes, FHA MIP costs have risen to their highest levels in history. Additionally, FHA loans made after Jan. 1, 2014 require MIP for the duration of the loan unless you made a down payment greater than 10%. You can see the full breakdown of Mortgage Rule changes on our blog. Conventional loans offer a much friendlier alternative, with no mortgage insurance after you reach 22% equity.

http://www.forbes.com/sites/markgreene/2014/05/08/hud-commissioner-wrong-about-fha-mortgage-insurance/

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The Benefits of a Conventional Loan

Though FHA loans offer a number of benefits and advantages to buyers, there are some disadvantages to them. Though conventional loans require a larger down payment or higher equity, they can provide some strong benefits. • Reduce or eliminate Mortgage Insurance Premiums. FHA loans require

MIP for the life of the loan, which can add $100 - $500 to your monthly payments.

• Conventional loans often offer lower interest rates than other loans. • Higher loan limits with more predictable monthly payments.

Learn more from our blog post: FHA to Conventional - Making the Switch

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When Should I Switch?

There is no right time to refinance, but you can choose a time that works best for you. If you took out an FHA loan in 2012, you probably still have great rates and easier insurance premiums, so you’ll need to decide if refinancing with today’s rate is worth eliminating your premiums. Refinancing will require equity or payment of cash for closing costs, so you should always work with a loan officer to determine which loan is best for your family and your needs. Contact New American Funding today to see what your refinancing options are.

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Switching from an FHA Loan to a Conventional Mortgage

Learn more about refinancing with a conventional loan at

www.NewAmericanFunding.com

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