FHA with 15% Down or Conventional with 25% Down?

[David Lao]

I'm in contract to buying a 4-plex in Oakland for 1.1 M. I plan to owner-occupy one unit and rent out the other three. I wanted to take out an FHA loan while putting just 3.5% down, but due to FHA's self-sufficiency test, I need to put down at least 15% down (said my loan officer). Here are the two options that I'm deciding between:

• A: FHA 30-yr fixed @ 2.25%/yr with ~1.00% (~$760/mo) MIP (for first 11 yrs) and ~1.75% (16K) UFMIP, and requires 15% (165K) down

• B: Conventional 30-yr fixed @ 2.75%/yr with no MIP or PMI, but requires 25% (275K) down

- I like A because I can have a bigger cash reserve while shorting a more US dollars. 

- I like B because there's no PMI, MIP, or UFMIP.

- Btw, I have limited cash for the down payment and the seller is not interested in financing.

As a buyer, would you prefer A or B? And why?