Mortgage questions, answered
Real questions borrowers ask, answered in plain English by The Mortgage Advisory, a mortgage lender and broker licensed in California, Texas, Florida, and Colorado (NMLS #1549739).
8 answers in FHA & Conventional
Clear searchWhat credit score do I need to buy a house, and can I buy with bad credit?
It depends on the loan. FHA allows a score as low as 580 with 3.5% down (500 to 579 with 10% down), most conventional lenders look for about 620 or higher, and VA doesn't set a minimum, though lenders usually do. A lower score doesn't always mean no, but it usually means a higher cost. The Mortgage Advisory reviews your credit with you and shows you which loan fits and what raising your score could save.
How strict are FHA appraisal and property requirements, and could they kill my deal?
FHA appraisals are a little stricter than conventional ones: the appraiser checks that the home is safe, sound, and secure, and flags things like peeling paint on older homes, a failing roof, or broken utilities. Most items are small and can be fixed before closing, and they rarely kill a deal when they're caught early. The Mortgage Advisory helps buyers and their agents plan for FHA repairs before the offer, not after the appraisal.
Can I get an FHA loan if I already own a home?
Sometimes. FHA loans are for the home you'll live in, and you can generally have only one FHA loan at a time. But FHA makes exceptions, like relocating for a job too far to commute, needing more room for a growing family, or moving out of a home you co-own with someone who's staying. You don't have to be a first-time buyer. The Mortgage Advisory reviews your situation and arranges FHA loans through approved partner lenders.
How do I refinance from an FHA loan to a conventional loan, and is it worth it?
You refinance into a new conventional loan that pays off the FHA loan. It's usually worth it when you have about 20% equity, because conventional loans don't need mortgage insurance at that point, and your credit has improved. The math has to beat the closing costs, especially if your current rate is low. The Mortgage Advisory is the direct lender on conventional loans in California, Texas, and Colorado and runs the break-even for you.
FHA or conventional: which is better when I have a small down payment?
It mostly comes down to your credit score. FHA needs just 3.5% down and is forgiving on credit, but its mortgage insurance usually lasts for the life of the loan. Conventional needs as little as 3% down for first-time buyers, and its PMI gets cheaper with a higher score and can be removed later. The Mortgage Advisory prices both side by side so you can see the real monthly and long-term cost.
Can family help with my down payment, and how do gift funds work?
Yes. FHA, VA, and conventional loans all allow down payment gifts from family members, and some allow gifts from others close to you. You'll need a signed gift letter saying it isn't a loan, plus a paper trail showing the money moving from the giver to you. If you're buying from a family member, a gift of equity can count as your down payment. The Mortgage Advisory walks you and your family through it before any money moves.
How much should a first-time buyer put down, and do I really need 20%?
No, you don't need 20%. Eligible veterans can put 0% down with a VA loan, first-time buyers can put 3% down on a conventional loan, and FHA needs 3.5%. Putting 20% down only avoids mortgage insurance on a conventional loan. The right amount depends on keeping enough cash for emergencies and closing costs. The Mortgage Advisory shows you the monthly payment and cash needed at several down payment levels.
How do I get rid of FHA mortgage insurance?
It depends on your down payment. For most FHA loans since mid-2013, if you put less than 10% down, the mortgage insurance lasts for the life of the loan; with 10% or more down, it ends after 11 years. The most common way out is refinancing into a conventional loan once you have about 20% equity, and The Mortgage Advisory will show you when that makes sense.