Financing in Bergen County>Question Details

Krishna, Home Buyer in Edison, NJ

With a credit score of 694, is the FHA my only option?

Asked by Krishna, Edison, NJ Wed Feb 16, 2011

Can put down 10% for 300k house including closing costs. How much would the mortgage insurance cost? How costly is FHA when compared to the conventional loan considering the insurance?

Thanks a lot guys.

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Answers

15
Hi again Krishna

FHA MIP (Mortgage insurance premium) is based solely on the loan amount. It also will stay on the mortgage for a minimum of 5 years. Its also now roughly half to 2/3 of what you will pay for COnventional PMI and is tax deductible.

Conventional PMI (premium Mortgage Ins) is primarily determined by your credit score, down payment, and debt to income ratio. Obviously the lower the first 2 and higher the last, the greater your PMI payment will be. However, unlike MIP, once your home accrues 20% equity, PMI drops off. Of course you'll have to do an appraisal to determine this, and if your home does appraises 20% higher from when you bought it, you have to contact your currrent loan servicer, forward them the appraisal along with the appraiser license, proof of being HVCC compliant, E and O certificate in order for them to review it and drop the PMI. PMI is now also tax deductible.
Hope this helps.
1 vote Thank Flag Link Fri Feb 18, 2011
Hi, Krishna

With a 694 credit score you can go either Conventional or FHA. Speak to a "licensed" and "experienced" LO to determine (based on your complete loan profile) what is the best program for you.
1 vote Thank Flag Link Wed Feb 16, 2011
You can obtain conventional financing with a minimum credit score of 680. on a $270,000 loan amount your monthly mortgage insurance would be $138 a month based on the calculations through MGIC which is the mortgage insurance company that would insure your loan.

With FHA your loan amount would be $273,375 and the monthly mortgage insurance would be $213 a month. You will have to keep the mortgage insurance for the entire 60 months. With the conventional option, if you feel that you have 22% equity in your home you can request that the mortgage insurance be dropped.

I would happy to help you and give you a loan commitment prior to finding a home. That would give you more leverage when putting in an offer.

Camille Marotta 732-539-9300
1 vote Thank Flag Link Wed Feb 16, 2011
Krishana,

No, FHA is not your only option with a 694 credit score.. if just comparing FHA and conventional, even with 10% down, I will say that FHA is your better option. I wrote about it here : Proof that FHA is better than conventional with a 699 credit score and 10% down.

http://www.fhaloansfhamortgages.com/2011/01/15/fha-loans-vs-…

If you are a Veteran and can do a VA loan, that would be better. If you are buying in an area that allows for USDA loans, that would be your next best option. If not, as I explained above, then FHA would be your next best option, even with 10% down and a credit score of 694.

If you need any help or have any more questions, please don't hesitate to contact me.

Thanks,
jeff
Area Manager cell : 609-440-5133 e-mail : jbelonger@ihmci.com
1 vote Thank Flag Link Wed Feb 16, 2011
Krishna, Wow, you have received some of the best and some of the (ahem) worst advice here. I would spend a lot of time debating out the specifics, but Jeff has already given you the absolute truth and skinny. I have known and read Jeff's blog posts for almost a year now (he posts a lot!)...I have never seen him lead a consumer astray and he has enlightened me on a couple FHA guidelines.

His comments on comparison are 100% accurate. Oh, and tax deductibility...set to expire as he stated.
0 votes Thank Flag Link Thu Feb 24, 2011
You can go either way with those scores. You really need to sit down with a mortgage professional and see each option side by side. Each has its pros and cons. While the mortgage insurance for the conventional loan is going to be lower, you will be looking at a higher rate (provided fees are the same). Would be happy to help out
0 votes Thank Flag Link Wed Feb 23, 2011
I think that there is a lot of misinformation here.
As far as conventional at your score, there is a difference between getting PMI on a brokered loan vs. a loan from a direct lender. You may need the 700 score on a brokered loan, but not when it comes from a direct lender.
On FHA, the factor at 90% financing is .85, so the MIP monthly would be $193.16 on a loan amount of $272,700.
Krishna, what you need someone to do is a comparison of what your monthly cost will be based on the rate you will pay. Because there is an adjustment to rate for a lower credit score on conventional, that is not the case on FHA. There are a few FHA lenders who may give you a small benefit for having a higher credit score, but you will not be penalized the same for the 694 score.
0 votes Thank Flag Link Tue Feb 22, 2011
Just go to http://www.Amerisave.com for today's current rates with personal info required. We have no application fees and no commitment fees.
0 votes Thank Flag Link Mon Feb 21, 2011
Krishna,

I need to add some details here... right now, mortgage insurance is only deductible until the end of 2011... there was a reason why I didn't get into detail like Rudy or some others mentioned. I already understand all the ins and outs... and from your scenario that you mentioned, it's safe to say that FHA is the better deal for you. I'll share this example again. Without getting into specifics and details, here is the reality, because numbers don't lie. Please click on the link. - http://www.fhaloansfhamortgages.com/2011/01/15/fha-loans-vs-… And this scenario is not including the pricing change for the worst for conventional loans that take place in April, but that most lenders that I know of have made the changes now. So that makes FHA even more cheaper.

thanks,
jeff
0 votes Thank Flag Link Fri Feb 18, 2011
Please talk with a local lender, if you do not know of any start with your bank as you already have a professional relationship. They can show you were you are at now, what you can work on and also share what incentives, rates, or plan would be best for you in your situation. They can also provide you with a mortgage calculator so you will have an idea about payments. Once you are pre-approved, find a local agent or Realtor to help you find the house you are looking for and make sure to let them know you are preapproved.

Best of luck.
Spirit
0 votes Thank Flag Link Fri Feb 18, 2011
Thanks Rudy. That helps!
0 votes Thank Flag Link Fri Feb 18, 2011
Thank you for all your time guys. Primary reason why asked the question is, I don't wanted to pay the mortgage insurance unnecessarily (at least in the long term). Doing some research on how long should I pay the insurance in both the cases.
0 votes Thank Flag Link Wed Feb 16, 2011
ps.. the $213 monthly payment that Camille gave was if you were to put less than 5% down. 5% or more, and your mortgage insurance is cheaper with FHA loans. Again, this stuff is written in stone and nobody can alter these figures or percentages when it comes to FHA loans.

thanks,
jeff
0 votes Thank Flag Link Wed Feb 16, 2011
Krishna,

I hate throwing people under the bus, but you need to speak to someone that actually knows what they are doing. FHA is set in stone on what the MI is... for conventional loans, it can vary depending on the mortgage insurance company. Suzanne says that most MI companies will only want +700 scores. Yes, that is true. But if you go to my linkm even with your scenario, that should be irrelevant because FHA is better because of the pricing.

Regarding the person from Philly, James? I have never dealt with that person. I only say this because he says that he has dealt with both people that commented, and then he made a recommendation. I just wanted to point out something that is not true.


@ Camille... your information is 100% wrong... the total loan amount Krishna put down 10% would be $272,700. The upfront MI is only 1% of the base loan amount. The mortgage insurance quote she gave for FHA is also wrong.It would be $191.25 a month. Sorry, but those numbers I just mentioned would not change one bit, no matter what lender you went to. The 22% equity thing? There is more behind it than just having the equity, which Camille does not talk about.

Sorry, but I had to bring this up, because if you wee to call someone that gave you better numbers, because their stuff seemed cheaper, it would change on you later anyhow.

thanks,
jeff
0 votes Thank Flag Link Wed Feb 16, 2011
Most mortgage insurance companies want a FICO of at least 700-720.
There is one that will consider 680 depending on your qualifications and where the property is located. (ratios, type of loan, type of property etc).
Pricing on the mortgage insurance is done on line with all of your pertinent information inputed into the system. Typically FHA works out better or the same as private mortgage insurnce. FHA mortgage insurance is an automatic approval where as on a conventional mortgage you need the loan approval and the mortgage insurance approval.
FHA is raising it's mortgage insurance rates effective April 18 so if you want to save you need to hurry.
0 votes Thank Flag Link Wed Feb 16, 2011
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