Their are a couple of differences in cost between an FHA loan and a conforming loan that you need to know about. They both involve mortgage insurance. With an FHA loan you will pay an up front mortgage insurance premium of 1.75% of the loan and a monthly premium of .55%.
With a conforming loan you will not pay up front mortgage insurance and your monthly mortgage insurance will range from .34% up to 1.2% depending on your loan to value and your credit score.
So to explain: If you are doing a $200,000 loan at 97% with a credit score of 725 you would pay: ***assuming 6% interest rate
FHA:
Up front mortgage insurance = $200,000 * 1.75% = $3,500. This amount will not come out of your pocket, it will be added to the loan amount. So if your maximum loan amount is $200,000 you total loan with up front mortgage insurance will be $203,500.
Monthly Mortgage Insurance = .55% *$200,000 = $1,100/12 = $91.67. So you will pay $91.67 in monthly mortgage insurance. This amount will be added to your payment every month. This amount is required for 5 years after which it may be taken off if your loan to value drops below 78%.
Total payment = $1,311.76
Conforming:
Up front mortgage insurance = Nothing.
Monthly mortgage insurance = 1.1% *$200,000 = $2,200/12 = $183.33. So you will pay $183.33 in monthly mortgage insurance. This amount will be added to your payment every month and can be taken off whenever your loan reaches 78% or less. It is at the lenders discretion how long you are required to keep this.
Total payment = $1,383.43
So the FHA loan will give you a better payment, but will have a little higher loan amount. This was a very simple example and would have many other factors in the real world. You would most likely not qualify for a 97% loan on the conforming side and you would have to do an FHA, but this will give you a good idea of what the differences are on the cost side.
Check out http://www.hud.gov/offices/hsg/fhahistory.cfm for more detailed info regarding FHA loans.
Also check out http://www.thebriteway.com/ for your refinance and purchase needs.
Have a great day!
Wednesday, March 11, 2009
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So here is the deal. I am looking for someone that has sucessfully worked out a modification with Wells Fargo. I have been unemployed for the past 6 months and finally got a job. In the mean time my mortgage payments have suffered on the same day I received great news about the job I was also informed my mortgage is now with an attorney. I am currently 97 days late an the mortgage and i want to make the payments once my first check comes in (start the new job on the 15th). I took a job which is significantly lower paying then the one I lost but at least it is a job. I need information on what to do and how to get the processed started with Wells Fargo. Is there a certain department I should start with and what type of information will they want. I am also upside down with regards to the value (home was purched in 8/07 great timing on my part). Any suggestions on how to help me would be awesome and I will keep checking to see if anyone has posted ideas...thanks....
ReplyDeleteI will work on it for you.
ReplyDelete