FHA 3.5% vs Conventional 5% Loan... Which one makes more sense?

Question

Would it save you money by doing a 5% conventional over an FHA 3.5% in the long run and on a monthly basis?

Ben Zimmerman · Answer

With a 3.5% FHA your mortgage insurance never goes away regardless of how much equity you build up as opposed to most other loan products where you can drop it once you reach ~20% equity. Adding PMI to your monthly payments can often increase your mortgage payments by 10-15%. This ability to drop PMI was especially useful in recent years when homes were skyrocketing in value, thus you would reach the 20% equity rather quickly.

Patrick Drury · Answer

@NA Waldron As @Ben Zimmerman alluded to the 5% conventional would be a better pick!

FHA 3.5% vs Conventional 5% Loan... Which one makes more sense?

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