FHA or Conventional (w/PMI)? (loan, credit score, rate, loan)

[mienhthornh]

Greetings Everyone,

I am a first-time homebuyer and in need of assistance.

I made an offer of $172K (subject to actual viewing) to a short-sale home and the offer was accepted.

Now, I need to decide on a mortgage loan; FHA or Conventional w/PMI. The maximum down-payment is $20k (which is only 12% of the sale price).

The current rate that I was provided to is:

FHA: 5.25%
Conventional: 5.35%

My ideal monthly mortgage payment is no more than $1,100.

Any suggestions?

[SmartMoney]

for the purposes of this discussion, PMI, MI, MIP are all the same thing.

There's some missing data here, like where you are located (in a declining market?), property type, credit score, how long you plan to be in the home, and if your Adjusted Gross Income eliminates you from deducting PMI (either FHA or conventional). My recommendations would be in this order:

80/10/10 - 80% first, 10% second, 10% down. Results = eliminates PMI. Not available in all market areas. Not all lenders can do this.

90% Financed MI. Again, this eliminates a separate PMI payment, but if your income precludes the write off, the MI is added to your loan amount and you make payments on the total. Downside - if you are going to be there for more than 2 years, you're rate will still reflect the MI rate. Not all lenders offer this.

Conventional 90% w/ MI, assuming qualifying ratios and credit are not an issue

FHA w/ MIP - last because the MI is up front and monthly

[VictorBurek]

Look to do a first and second as prior poster mentioned. Much better than conventional with PMI and far less expensive than a FHA loan.