Until this month, there has been a clear line in the sand for which loan program made the most sense for a specific borrower. Common wisdom dictated that if you had sound credit and at least 20% to put down on a house, you would go with a conventional mortgage because the fee structure was lower. If you had more than 10% to put down but less than 20%, you would size up FHA or conventional based upon your credit and debt-to-income ratios. And if you had less than 10% to put down, or if you had credit issues, you would look at FHA or VA.

But with the new loan programs Freddie Mac and Fannie Mae released, there is now a true blurring of lines. You can now get a traditional mortgage with 3% down, which is actually a lower down payment than is required by FHA. And if you have good credit and low debt ratios, you can get significantly better terms, lower fees, and mortgage insurance which will eventually go away (unlike FHA, where insurance never goes away) by going conventional.

So what was once a rather clear cut arena is becoming quite confusing. If you are planning to buy a house with a smaller down payment, you might want to contact a qualified mortgage loan officer to discuss your options and run the numbers. Because you might just be able to get the terms you were hoping for today, rather than waiting to keep building that down payment.

If you have any questions about the new lending programs or about getting prequalified, please contact me. If you would like to add anything about how these new programs impact FHA and conventional mortgages, please leave a comment.