3.5% Down FHA vs 5% Down on conventional loan?

[Vamshi Ananth]

Hello BPers,

I am currently considering a deal which I paln to finance it though a bank. The property is built in the early 1990's and is in a failry good shape , no structural damage but needs some cosmetic reparirs and updates. I have been advised by my Agent to go with a 5 % down convntional loan Vs a 3.5% down FHA loan.

My Agent cites the PMI (Private Mortgage Insurance) charges beign gone after I accumlate 20% equity on the property on a 5% down conventional loan Vs PMI (Private Mortgage Insurance) beign charged for the life if the loan for an FHA (unsless I refinance it later after equity buildup) as a reason not to go for a FHA loan.

Since I am planning to buy an older home I think FHA would be more stringent when it comes to inspections and appraisal and I have a much reliable appraisal and inspection reports when compared to a regular inspection where thigns might be overlooked upon.

Is this a genuine concern? Is my Agent looking after my best interests? I am curious to know. What are your thoughts? Appricate all your comments.

[Aaron K.]

Conventional will probably be easier and possibly even cheaper over the long term if you have a 5% down conventional available to you that is valuable. FHA will always be there for your primary residence for the foreseeable future. Conventional with only 5% down is quite rare. If you were to ever move out and rent the property conventional would also be to your benefit.