Benefits of Buying A Home With A Conventional Mortgage Loans With 97% Financing
Obtaining a mortgage loan up to 97% financing or LTV (Loan to Value) is more advantageous than obtaining an FHA loan to 96.5% LTV.
One of the benefits of applying for a Conventional loan 97% LTV is that FHA loans carry an additional mortgage insurance called UFMIP (Upfront Mortgage Insurance Premium) which is equal to 1.75% of the initial loan balance and is financed through the life of the loan.
Example:
Let's assume someone is buying a $500,000 house using an FHA loan. The base loan amount of the new loan would be $482,500 (96.5% of $500,000 and the UFMIP would be $8,443.75 or 1.75% of the new base loan amount of $482,500) This premium, which is designed to protect the lender, will be amortized throughout the life of the loan ☹ increasing the borrower's initial loan amount. ☹
In addition to the UFMIP, FHA loans carry a monthly Mortgage Insurance Premium (MIP) like any loan which (LTV) is less than 80%.
Now, a Conventional loan up to 97% LTV does not have an UFMIP like FHA loans 😄 and although it carries a monthly insurance premium like an FHA loan, one of the big differences of this loan is that the monthly insurance will be automatically taken off the loan once the borrower has paid off 22% of the initial loan balance and on FHA loans the monthly insurance premium stays there for the life of the loan or until the borrower reaches 20% equity on their purchase and decides to refinance out of the FHA loan.
For more information on the benefits of the Conventional loan up to 97% LTV, please watch the above video and if you want to find out if qualify, please use our FREE Conventional 97% Loan Mortgage Qualifier