Financing FHA vs. Conventional
If finding a Minneapolis condo wasn’t hard enough, deciding on how to finance the purchase could be another big decision.
The most popular ways to set up a mortgage for your new property are through an FHA insured loan and a conventional home mortgage. There are benefits to both avenues, and depending on your situation one may be better than the other. An FHA insured loan is backed by the Federal Housing Administration and allows those who would normally not be able to afford the loan to borrow money for the purchase of the property. To abtain this loan, a mortgage insurance premium (MIP) measured as a percentage of the loan will be required at closing. Typically, an FHA loan requires only 3.5% down but has higher guidelines to follow. On the flip side, conventional loans require a slightly higher 5% down payment but have far less guidelines to follow.
In this current market, going conventional with a higher down payment will speed up the mortgage application and closing process. Sellers would mch rather work with buyers who are going with conventional financing. Words of wisdom for 2012: save up for your down payment and stick with a conventional mortage loan.