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The Straight Truth

By Jennifer Beeston @ Guaranteed Rate Mortgage

By Jennifer Beeston | Mortgage Broker
or Lender in California

Why 5% down conventional is the next hottest loan and why you want to qualify for it

The FHA Reform Act of 2010 passed overwhelmingly in the House of Representatives last week. This approved FHA to raise the monthly mortgage insurance amount from .55% to a max of 1.55% (FHA would like .9%).  This is not great news for borrowers.

In April you may recall they raised the upfront mortgage insurance premium from 1.75% to 2.25%.  Well that is not enough for dear FHA so fairly shortly you will begin to see the monthly premium rise.  The details are still vague but it is not looking good. What this means to you?

Well bottom line, if you can qualify it is better to go conventional 5% down.  Prior to this news the monthly mortgage insurance for 5% down was significantly more than FHA so it did not necessarily pencil out in the 5% down favor.  Add to it that to go conventional 5% you need a lower debt to income as well as 2 months reserves and a credit score over 680 it could in many cases prove daunting.

For Home shoppers, if you have a low debt to income (under 41%) and a credit score over 680 you need to start saving so that you can do 5% down conventional.  Remember beyond the 5% ytou will need two months reserves and the 5% cannot be a gift. 

With what is coming down the "stream" going this route could save you quite a bit of money in both the long run and short term.

If you can save money go for it.  Could save you thousands down the road:)



By Irene Brown,  Tue Jun 22 2010, 12:50
How about putting 20% down and if you can't, you shouldn't buy the house. Now, that's hot!!!!
By Jennifer Beeston,  Tue Jun 29 2010, 07:43
That is hot Irene:)

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