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The Benefits of Conventional Lending vs FHA
Mortgage Insurance is required on loans where a 20%
down payment is not available from the Buyer/Borrower.
Since most all Conventional Loans in the traditional marketplace require a minimum of 5% down, (Note: I said 5%. You don't need a 20% down payment!) I'd offer that the statistics below show that Lenders are improving at getting this info out and educating potential Buyers.
Consider the following statistics:
- The volume of loans closed in the 3rd Quarter of 2014, WITH Private Mortgage Insurance, was UP nearly 30% from the previous quarter
- Nearly 40% of all loans closed and sold to Fannie Mae/Freddie Mac in the 3rd Quarter of 2014 involved Mortgage Insurance, was up nearly 10% from just a-year- and-a-half ago
What you can assume from this info is:
- More Buyers are aware that you don't need 20% down (Great news!)
- Private Insurers have loosened up their guidelines
- More transactions have moved from what may have previously been a FHA Loan ... to Conventional (Perhaps as a result of FHA's Mortgage Insurance becoming too "pricey")
Item #3 above tells me that individual Mortgage Lenders are successfully illustrating to their Borrowers the benefits of putting 5% down, versus FHA's 3.5% down. Those benefits include the ability to save costs upfront:
- At Closing, FHA charges 1.75% times your loan amount for their coverage
- FHA also charges a higher monthly rate than most all Conventional Loans with Mortgage Insurance
It also tells me that the number of eligible properties (Condos, homes in disrepair, etc.) is shrinking in terms of being FHA-financeable.
While FHA remains a very viable First-Time Homebuyer option, and for some scenarios, a Buyer's only option, these numbers and statistics prove that some positive things are happening in the "private" side (Non-Governmental) of financing. Something that the majority have been hoping for since the "tightening" began in 2009.
* Looking to Buy, Build, or Refinance a home in a Lincoln-Way Community, Will County, or elsewhere in the Chicagoland area? Contact Me today! I'll put my 37 years of mortgage experience hard to work on your behalf.
I can be easily found at:
Gene Mundt, Mortgage Lender, a Lender with 36 years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including: The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL.