Frequently Asked Questions about Loans & Refinancing in San Diego

What is the difference between a regular & an FHA loan ?
FHA is an loan insured by the Federal Housing Administration, and is therefore issued through a lender using  FHA’s guidelines.  A conventional loan is issued based on the lender’s guidelines.
What are the advantages of an FHA loan vs a regular loan ?
That depends on the lending environment at the time.  As of today the biggest advantage is a lower down payment.
WHat are the drawbacks ?
Again it depends on the lending environment at the time, but as of today the drawback I see is that you will pay both upfront mortgage insurance AND monthly mortgage insurance for the first 5 years of the loan regardless of LTV (loan to value), and the rate is higher.
Is there a situation where a regular loan would be better than an FHA loan ?
Yes, and again these answers all depend on what is available on the conventional market at the time.  Today, the upside of conventional is that if you can put down enough money to qualify for the conventional loan on the 4 unit complex (which is 25 to 30% down) you have a lower rate, no upfront M.I. (mortgage insurance) and no monthly MI. This is a big savings over the life of the loan.

Put simply if you have the cash to close conventional it saves you a lot of money on interest and MI. FHA is only a better option when  you can’t come up with the required down payment for the conventional option.
What are all the requirements to qualify & be approved for an FHA loan ?
You have to meet there Debt to Income Ratios (generally 43%) including all expenses for the property you are buying. Plus you have to make the minimum down payment,  pay upfront MI of 1.75% of the loan amount, and closing costs.
What is the required down payment % amount for an FHA loan ?
At present for 4 units: 10 to 15% down.  This is where the FHA advantage is since conventional is asking for 25 to 30% down.

Contact Joy Houston for any additional questions about Loans and Refinancing.
Mortgage Broker | Loan Officer
Joy@WestoftheFive.com