FHA versus Conventional Mortgages | Truth in Lending
Fha versus conventional mortgages are quite different so I want to show the truth in lending information to a prospective buyer. Recently I showed the differences in the monthly payment for a Connecticut Housing Finance Authority (CHFA) Mortgage at 2.75% and a Conventional Mortgage at 3.75% with 5%, 10%, 15%, and 20% Down payments.
Today, I want to continue along that same line of thought, but this time by comparing the cost between a 30 year fixed Conventional Mortgage to a 30 year fixed FHA Mortgage, at the same interest rate of 3.5%, and with the same Down payment of 5%.
First lets look at the costs & Amortization Schedule for the 30 year fixed Conventional Mortgage with a 3.5% interest rate, and 5% Downpayment.
Now lets look at the costs and Amortization Schedule for the 30 year fixed FHA Mortgage with a 3.5% interest rate, and 5% Downpayment.
Let’ compare the two Mortgage Programs:
Conventional Mortgage FHA Mortgage
APR: 4.075% 4.364%
Interest Paid: $132,349.98 $141,455.68
Total Paid: $320,626.69 $329,727.61
Monthly Payment: $1,470.71 $1,526.46
Loan Balance After
5 Years: $170,424.71 $173,406.57
(length of time of most loans is 5 years)
The two Truth-In-Lending Statements and Amortization Schedules clearly show that if a Borrower can make a 5% Down payment of their own money, that the Conventional Mortgage is the cheaper loan both in the short and long term. The difference between the monthly payment will continue to increase once the New FHA Monthly Insurance Premium (MIP) goes up on April 1st of this year.
The life time costs of the FHA Mortgage will also get much higher once the cancellation of the MIP is eliminated on June 3rd 2013.
FHA will continue to have advantages over Conventional Mortgages, such as the required Down payment is less, more flexibility on credit scores, and higher Debt-To-Income limits. But as the FHA costs rise, these other advantages will become less and less of a factor. With the information above, I am left with the conclusion that Truth-In-Lending Does Not Lie, Conventional Mortgages Less Costly Than FHA. FHA versus Conventional Mortgages | Truth in Lending.
Info about the post author and guest blogger, George Soutu:
George Souto is a mortgage Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or firstname.lastname@example.org.
I appreciate George’s shares on mortgage information in the current real estate times with my web site readers at www.RIHouseHunt.com
Rhode Island real estate agent and licensed RI agent, Ginny Lacey Gorman, helps list homes and waterfront property in Rhode Island at 401-529-7849 or email me at Ginny@RiHouseHunt.com