Sunday, August 8, 2010

Part 1: one size shoe does not fit all borrowers.

Part 1: Why FHA Loans will still be the better choice for many home buyers ie. one size shoe does not fit all borrowers!

We just posted information on the new FHA Mortgage Insurance Changes. I examined the options that now come to mind as potential competitors for the selection of a loan with low downpayment, or little equity.

We compared the following loan options:

  1. FHA Loan with 3.5% down
  2. FHA Loan with 5% down
  3. 5% down Conventional loan (yes, we offer this in california with a 680 fico)
  4. 5% down conventional loan with no MI (we pay the MI for you).

As the table below illustrates, the payment is similar between the 95% conventional loan with PMI and the FHA Loan with 3.5% down. The FHA loan requires less downpayment, and is therefore more beneficial in my analysis. However, the 95% Conventional loan with no MI now becomes the lowest payment option, in spite of a higher interest rate (required to cover the cost of the Mortgage Insurance, which is paid as a lump sum upfront by the lender at no cost to the borrower).

Check out our next post for more reasons why FHA will still be the loan of choice for many.

Here is a link to the spreadsheet of the numbers for these low down payment options.

VanDyk Mortgage is a FHA Lender offering FHA, FHA Jumbo, FHA Streamline, and FHA 203K Renovation and 203K rehab loans thoughout California and Washington state. Call Brian Skaar direct at 760-752-4480 to get started.

Click on the table below to enlarge:

No comments:

Post a Comment