FHA Loan or 3% Down Conventional w/ higher interest?

[Martin Ceja]

I've been talking to a few Mortgage Loan Brokers in my area (Inland Empire, CA) and asking them about FHA loans but most of them have been recommending a low down (3% down) conventional loan with a "higher interest rate" instead. Thoughts? Would a low down conventional be better than an FHA? Or would it be best to get an FHA (3.5% down) with PMI and refinance after a couple of years? All help appreciated, thanks!

[Jared Bouzek]

@Martin Ceja This is really going to depend on your individual factors to get specific, but the majority of cases I see, conventional 3% down with lender-paid mortgage insurance comes out ahead of FHA because by the time you tack on the monthly MI with FHA, your total effective interest rate is higher than the conventional rate. Not saying that's a one-size-fits-all but it's true a good portion of the time. You just need to be careful of the income limitations with the conventional programs (HomeReady & Home Possible). Because we're likely going to see interest rates increasing for the near future, you probably won't gain anything doing FHA and waiting to refinance. If you're looking for a top-notch loan officer who is licensed in CA, you should connect with @Chris Mason.