FHA Loans Questions with Felicia Dosal

Should a Buyer With 20% Down Get an FHA Loan? Conventional loans require private mortgage insurance if a buyer cannot put 20% down. FHA loans require mortgage insurance regardless of how much money is put down initially. Conventional wisdom says that buyers should only consider getting an FHA loan only if they cannot put 20% down. This piece will question that position and ask: Should someone who can put 20% or more down consider getting an assumable loan (e.g. FHA) even though the assumable loan would require paying mortgage insurance? Several weeks ago, when rates were higher, I asked well known local blogger and Licensed Mortgage Originator Rhonda Porter of mortgageporter.com to run me some numbers on two different loan packages. The first was an FHA loan, which at the time had a 5% rate (5.403 APR). The second was a conventional loan that had a 5.125% rate (5.201 APR). The initial loan costs on each loan were relatively close to each other, and the most significant difference between the loans was that the FHA loan still required mortgage insurance, both an up front amount and monthly amount of $132.44 for the first 60 months. Most buyers today probably pick the conventional loan to avoid paying the mortgage insurance. My reason for doing this piece is that FHA loans are generally considered assumable loans. That made me wonder: Can there be scenarios where a buyer would be better off having an assumable FHA loan, even if they have to pay mortgage insurance?