Is FHA worth it now for the house I want or should I wait and get conventional?
I can afford both. If I go with FHA I still want to put down 15%+ to keep the payment lower. But if I went conventional I’d go 20% down but my DTI comes into play which is where I’m on the cusp of not getting approved via conventional because of my DTI.
I think that you should definitely consider the conventional loan. If you make a 20% down payment, then you will not need mortgage insurance.
A FHA loan will include both upfront mortgage insurance as well as monthly mortgage insurance payments. In addition FHA premiums are set to increase in April 2013. (Cancellation policy will change in June 2013).
It is not clear why you would qualify for a FHA loan (with Mortgage Insurance payments) and not qualify for a conventional loan. The DTI requirements for a FHA loan are 31% (upfront DTI which includes all housing related expenses) and 43% for the total DTI. Conventional loans are available up to 45%,
No matter which loan you choose, make sure that you have sufficient capital reserves and emergency savings funds. Also, I recommend that you don’t max out on your DTI. Make sure that you take care of your other debt payments.
I recommend that you shop around. Check out mortgage rates at Bills.com: http://www.bills.com/mortgage-rates/ and then get a quote for different types of loans. Ask the lender for a pre-approval, based on documents which prove your income and credit. But there is no reason why you would not qualify for a conventional if you qualify for an FHA just because of the PMI not being an issue. Another thing to think about is that the PMI on a FHA loans is for the life of the loan now so if you can put down 20% why wouldn’t you?
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