Question on loans Conventional and FHA

[Tommy Mckeown]

So I met up with a real estate agent yesterday and I was talking about using an FHA loan but he was telling me how bad the FHA loan is. That I should go for a 5% conventional loan. Does anybody have any tips on what is the difference because I'm kind of confused because both of them you have to pay mortgage insurance until 20% of what I know. It was hard to get information out of him. I got the memo from him that $60,000 in California kind of by the beach I would not be able to Ford a house with a 3.5% or 5% loan down even though I want to house hack and have other people live in the rooms! I wasn't trying to buy it from him I was just having a conversation about the future for me and seems like he was trying to tell me it was impossible for me to start one day without having huge amount of money I'm 20 years old and I'm trying to get started in about five years getting my first place. With about $60-$100,000 hopefully all in let me know your guys thoughts thanks.

[Chris Mason]

Originally posted by @Tommy Mckeown:

So I met up with a real estate agent yesterday and I was talking about using an FHA loan but he was telling me how bad the FHA loan is. That I should go for a 5% conventional loan. Does anybody have any tips on what is the difference because I'm kind of confused because both of them you have to pay mortgage insurance until 20% of what I know. It was hard to get information out of him. I got the memo from him that $60,000 in California kind of by the beach I would not be able to Ford a house with a 3.5% or 5% loan down even though I want to house hack and have other people live in the rooms! I wasn't trying to buy it from him I was just having a conversation about the future for me and seems like he was trying to tell me it was impossible for me to start one day without having huge amount of money I'm 20 years old and I'm trying to get started in about five years getting my first place. With about $60-$100,000 hopefully all in let me know your guys thoughts thanks.

 So, unpopular opinion: it doesn't really matter what the actual differences are. 

What does actually matter is that Realtors, including in all probability the listing agent of your dream house, think that FHA loans have these crazy absurd property standards making it impossible to close, or close on time, in 100% of cases.

None of that is true, at all (I could go over why Realtors believe that, it involves both self-selection bias and confirmation bias acting together, but that's not strictly relevant to your question), but that listing agent believes it's true, and will advise their seller client to throw your FHA offer in the trash, if they have any other options at all in terms of which offer to accept, which is very probable in this market... because, guess what, all your competing buyers also have Realtors, and they too are advising their clients to use conventional rather than FHA. So if even a single of your 15 or 20 competing buyers takes their Realtor's advice to use a conventional loan, that's who wins the property, all else being equal.