The Federal Housing Administration (FHA) is insuring a greater percentage of loans than during any time in recent history. In 2006, it insured roughly five percent of the purchase mortgage market, but today, 35 percent of millenials choose an FHA mortgage. "Going FHA" is more common than ever before- but is it better?
In short, it depends on your situation. Like it's conforming counterpart, an FHA-insured mortgage is available as a fixed-rate loan and as an adjustable-rate one, and payments for either loan type are made monthly and come without prepayment penalties. However, FHA mortgages carry a different set rules that can render them more attractive to young buyers for financing as opposed to a conventional mortgage.
What's the difference between FHA and Conventional?
Benefits of an FHA Mortgage
So, which are better, FHA loans or conventional ones? Like most things in the mortgage business, it depends. While both FHA and Conventional loans offer low down payment options, conventional loans do not require mortgage insurance for the life of the loan, whereas FHA loans do. On the other hand, FHA loans are assumable, so if you can find a property with an FHA loan at a competitive rate, you could potentially enjoy savings each month on your mortgage. The first step to determining which of these loan types is best for you is to connect with a mortgage banker to assess your credit history and determine if you qualify for both loan types.