FHA vs Conventional Loans | 2022 - YouTube

fha versus conventional loans in 2022. so  did you know that every year the conventional  

and fha loan amounts potentially change  so we are currently in record-setting  

values across the country so both fha and  conventional raised their maximum loan amounts  

for both of those types of loans now these are  not the only loans out there but the majority  

of lenders follow these guidelines for both of  these loans okay now there are other loans there's  

va loans usda loans there's jumbo loans and we'll  talk about that very briefly in this video so  

let's say you're buying a home and you're going  to be getting an fha or a conventional loan so  

i'm here to just talk about some of the basic  differences between the two just to give you  

some working vocabulary on things to talk about  your local lender with so fha stands for federal  

housing administration that is the loan that is  subsidized and governed by the government now you  

will never pay your payment to the government  you'll pay your loan to a mortgage lender but  

the guidelines and the security of the loan behind  the scenes is the good old usa federal government  

and it's it's restricted by the housing urban  and development and they're the ones that make  

the rules for the fha loans so the current  loan amount in 2022 maximum for fha loans  

is 420 hundred and eighty dollars there are parts  of the country usually on the coast that have  

higher limits so if you're in pretty much the  center of the country this probably applies to  

you this this maximum but you can just go to  the fha website look for max loan amounts and  

and you could pretty easily find it on the search  on the internet so for the majority of the country  

420 680 000. now here's a couple of other uh basic  differences on an fha loan and why this may be  

a good loan for you the first thing is that  a down payment on an fha loan whether or not  

it doesn't matter that if you're a first time home  buyer you can be an anytime home buyer is only 3.5

that is extremely low and lets borrowers get  into a loan with a very minimal down payment  

putting down more money might be necessary in  in order to to meet that maximum loan amount so  

for different reasons people put more money down  you need to be aware that the mortgage insurance  

premium or mip as it's called is on an fha loan  for the majority of the loan now depending on the  

number of years of the loan whether it's 30 or 15  and depending on your down payment there are some  

instances where later in down the line usually 11  to 12 years from now you might be able to waive  

the mortgage insurance that's monthly but for  the most part the low down payments less than 10  

on a 30-year loan you have to pay the mortgage  insurance premium and the monthly mortgage for  

the duration that you're in the loans that's  very important to know about fha loans  

now another great thing about fha loans is they  have super flexible underwriting guidelines the  

credit score for fha can go down to 600 there's  some companies that go down to 580 they're few  

and far between but they are out there but 600  is the mainstream most of the lenders follow  

600 now why this is important for you is that we  understand that things happen we understand i mean  

that the credit score the guidelines understand  that things happen so fha is more lenient on  

things like foreclosure bankruptcy and the time  period that has to pass between those events so  

foreclosure is usually three years bankruptcy is  two sometimes less talk to your local lender about  

that if that applies to you but for those reasons  many people fha is the only option for them  

another final detail that i'll mention about  a fha loan is that fha will allow up to a  

55 debt to income ratio in most cases as long  as all the other a lot of other things are met  

so 55 dead to income ratio is a huge jump from  conventional loans which we'll get to next  

but that means that for every dollar that you  make 55 percent can go towards debt like housing  

payment car payments student loan payments  etc etc so these are just the few important  

details about a fha loan to talk to your local  lender about whether this is the product for you  

now we're going to go into a conventional loan so  conventional loans are governed by fannie mae and  

freddie mac there are the entities that make the  rules for these loans now again similar to fha  

you will never make your payment to fannie mae and  freddie mac it's the lenders the mortgage lenders  

that service these loans that are guaranteed by  fannie mae and freddie mac but they make the rules  

so we've got to mention them the maximum loan  amount is six hundred and forty seven thousand two  

hundred dollars that means that any loan amount  under this amount is going to conform to the  

guidelines that i'm going to talk about if you're  over that amount in your loan you're considered a  

jumbo or a non-conforming loan and those rules  are different and not the scope of this video  

so conforming loans usually favor  people with a higher credit score  

unlike fha loans where the interest rate is very  similar no matter what credit score you have  

conventional loans are very much dictated and  driven by the credit score of the consumer  

so one thing to be aware of and again  this is in 2022 when we're making this  

when you're putting less than 20 percent  down conventional loans will favor  

you if you're if your credit score is usually  above 700. so that's a credit score to aim for  

is above 700 for a conventional loan  now if you're putting 20 down or more  

you can go down to 620 so that's something that's  that's worth to note now the big difference  

between fha and conventional is right here  so pmi private mortgage insurance is required  

when less than 20 percent is put as a down payment  this amount can be waived later on through either  

extra payments getting you below 80 percent  loan to value or appreciation in your property  

after two years you're able to request from the  lender if appreciation and and pay down combo  

has you below the 80 percent be sure to watch  my video on waving pmi in a conventional loan  

where it goes in detail about how you can do that  and we'll put that actually here in the comments  

that that particular video you can watch it  later so pmi is a big thing whereas on fha pmi  

is for the duration of the loan on conventional  it's it's not forever it can be waived later on  

if you meet certain criteria another important  thing to mention about conventional you can put  

three percent down if you're a first-time buyer  that means if you have not owned a property or  

been entitled to a property in the last three  years you're considered a first-time buyer  

now five percent down is the minimum for everybody  else so let's say you have owned a property in the  

last three years you do need to put a minimum of  five percent down of course as long as you qualify  

for the payment so fha versus conventional loans  this video summarized the difference between the  

two definitely talk to your local lender about  what's best for you if you're in texas please  

call me watch my other videos got over 300 on  youtube that are here to help you as you're buying  

your home share with a friend comment below  let me hear your questions talk to you soon