FHA versus conventional upfront mortgage- old home inspection report. Need Help.

Los Angeles County, California
Starting Out
3yFollow

FHA versus conventional upfront mortgage- old home inspection report. Need Help.

Rahnesha White
New to Real Estate · Anaheim, CA · Member since 2020 · 29 posts · 7 votes

So I'm trying to determine if I want lock in a FHA loan or conventional loan I qualify for both. I don't like that the FHA loan is essentially $5,800 more for the cost of the loan due to the upfront mortgage insurance even though its financed into the total loan amount. However, I just got the home inspection report back and there are a lot of things are that flagged. I'm thinking that I might have more negotiation power locking in a FHA loan because I know the lender has certain required repairs that the seller would mostly likely have to fix prior to closing.

If I go conventional I would save the $5800 upfront mortgage insurance but I don't think I would have much negotiation power with the seller to fix things per my agent observation. So the question to me becomes do I think the lender would require the seller to fix at least $5800 in repairs to justify doing the FHA loan since I qualify for conventional also- FHA seems more protective since its an older house and this is my first home not exactly sure what to look for.

I'm not sure because I don't have much construction knowledge to determine from the report how much the repairs might potentially cost but I do I see a lot of things flagged on the report some things I noticed were ...Roofing has ponding/roof
shingles that are damaged, Termite Damaged was visible In the Framing Members, Due to the installation of finish surfaces, the slab is mostly inaccessible and could not be throughly inspected, Soffit damaged/rotted wooden siding trim had termite damage, Stucco siding had damage
sections. Garage has open live wiring exposed suggested to install, small Shop in back yard roof sheathing has Water damage, missing smoke detectors/carbon monoxide detectors in the rooms, no A GFCI Outlets in Bathroom.. I'm not knowledgeable enough in the construction part to know how bad or how much is much cost to make repairs. Would love to know your thoughts can also DM me. Thanks 

0Reply
17 views

Most Popular Reply

Brayden Hrycko
Lender · Allentown, PA · Member since 2023 · 207 posts · 38 votes
3y

Hello @Rahnesha White,

Another thing to consider is that just because there are some things that are flagged that need to be fixed prior to closing, that doesn’t mean the seller will pay for those. In this market, it is very common for the seller to jump ship if they need to put more $ out. It is still a negotiation between you and the seller. 

Also, take a look at the PMI and the rate/payment for fha vs conventional when running numbers. You'll see what you're saving and if that $5,800 makes sense over time as you're saving more monthly then that $5800 strapped to the loan would add to the payment itself.

1Reply
See this reply in the discussion

3 Replies

Jump to latestLatest
  • Justin Hammerle
    Realtor · Providence, RI · Member since 2022 · 404 posts · 262 votes
    3y

    @Rahnesha White - If you go FHA you would also want to take into consideration the cash savings you are getting from the down payment. Most go with FHA because of the 3.5% down payment and favorable interest rate when compared with conventional. If this is not as important to you, then you could go conventional to forego the mortgage insurance.

    In terms of the repairs; FHA is more restrictive than conventional but not significantly; conventional will still require an adequate roof life. A roof replacement alone could run $10k+ depending on the size of the property.

    0Reply
  • Brayden Hrycko
    Lender · Allentown, PA · Member since 2023 · 207 posts · 38 votes
    3y

    Hello @Rahnesha White,

    Another thing to consider is that just because there are some things that are flagged that need to be fixed prior to closing, that doesn’t mean the seller will pay for those. In this market, it is very common for the seller to jump ship if they need to put more $ out. It is still a negotiation between you and the seller. 

    Also, take a look at the PMI and the rate/payment for fha vs conventional when running numbers. You'll see what you're saving and if that $5,800 makes sense over time as you're saving more monthly then that $5800 strapped to the loan would add to the payment itself.

    1Reply
  • Robert Reynolds
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 302 posts · 163 votes
    2y

    Hi Rahnesha,

    I wouldn't choose FHA or Conventional based on FHA required repairs. You won't know until after appraisal if they are even called out. I would probably lean towards saving money without the FHA and ask for credits or repairs either way. On your initial offer did you say you were going with a FHA or conventional loan? If you switch it mid-escrow, the seller could back out, especially if you are going from Conventional to an FHA. As a listing agent I wouldn't allow that to happen, especially in this market where there are usually multiple offers on every property. I listed a house today, and literally got an offer in my inbox 6 hrs later, over asking, when offers aren't due until Tuesday. Let me know if you have any questions, always available to help, but your agent and lender should be able to advise you best. Good luck and lock it up if you really like it. Trust me, in 5-10 years, you won't be even thinking about the $5,800 difference. When I bought my house 8 years ago, I thought I maybe overpaid by like $25k. $900k later in appreciation, I don't even care at all if I might have slightly overpaid at the time. The scarier thing would have been if I missed out and waited a few years, and had to pay $100-$200k more.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free