FHA financing requires a minimum 3.5% downpayment.Â FHA financing
requires both upfront and monthly mortgage insurance payments. Comparatively,
conventional financing can be accomplished with as little as 5% downpayment and
only one upfront mortgage insurance payment; no monthly mortgage insurance is
required in this instance.
FHAâ€™s upfront mortgage insurance payment is
currently 1.75% of the loan value and another 1.25% annualized but paid monthly.
Effectively, the borrower is paying 3% of the loan value in the first year alone
and 1.25% for years thereafter.
Conventional financingâ€™s required
mortgage insurance upfront payment is 2.18% and does not require any future
payments. If the borrower has an additional 5% for the downpayment the upfront
mortgage insurance fee drops to 1.63%.
Even though FHAâ€™s interest rates
average approximately .25% lower than conventional the monthly mortgage
insurance payment quickly erodes the appearance of any savings. For example, a
borrower would save an approximate $170.00 per month and realize an $11,000
savings over 5 years when considering a $200,000 FHA mortgage versus
Who then should seriously consider FHA financing as their
only via financing option?
â€¢ Borrowers with less than a 680 credit
â€¢ Borrowers with a debt to income ration in excess of 45%
I work with very competent loan officers at numerous lending institutions.Â For recommendations, contact me at www.DestinHomeRealty.com