The FHA (Federal Housing Administration) mortgage has always been the popular choice of first time home buyers with moderate income. Several years ago, conventional loans (Fannie Mae and Freddie Mac) and other exotic loans became the mortgage of choice with their 100% financing products. Since the decline of the housing market and the return to strict lending guidelines, the popularity of the FHA mortgage has returned again. Today, borrowers continue to question what’s right for them, an FHA or conventional mortgage when looking at cost comparison.
Both types of mortgages have basic fees that are charged at closing. These fees can be thousands of dollars and vary from state to state. Appraisal fees and credit report fees are generally charged upfront by the lender at the time of application. Fees such as processing, underwriting, wire transfer, title, flood certification, origination and discount (points) are charged at the time of closing. Keep in mind that any fees charged by the lender for an FHA mortgage must be actual fees and cannot be inflated. An FHA appraisal usually cost more than a conventional appraisal because it involves more information for the protection of the borrower. FHA also sets the origination fee limit to a maximum of 1% of the loan amount.
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FHA VS CONVENTIONAL LOAN
