No. 3: ‘Conventional vs. FHA financing: Which is cheaper?’

Mortgage and down paymentNumber three on our Top-10 most popular articles of 2012 is “Conventional vs. FHA financing: Which is cheaper?

Publish date: March 02, 2012
Written by: Michele Lerner


The U.S. Department of Housing and Urban Development (HUD) announced on February 27 that mortgage insurance premiums on FHA loans are set to rise starting April 1, increasing the cost of these mortgages to all new purchase and refinance borrowers.

Lenders say that borrowers who can qualify for conventional financing may actually find the monthly payments are lower (even if they must pay private mortgage insurance) than FHA loans.

“Even before this insurance premium increase, monthly payments were pretty close between a conventional loan with PMI and an FHA loan, but now the distinction becomes clearer and conventional financing will usually be the better deal,” says Rick Sharga, executive vice president of Carrington Mortgage Holdings in Santa Ana, Calif.

This latest increase marks the fourth time FHA insurance premiums have risen since April 2010. For FHA loans under $ 625,500, the annual premium will increase by 0.10 percent to a total of 1.25 percent of the loan amount, while loans above $ 625,500 will see a 0.35 percent increase, totaling 1.5 percent of the loan amount. Upfront premiums will increase by 0.75 percent, according to HUD.

Click here to read the entire article.

HSH Associates Financial News Blog

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