Home Buying in 90604>Question Details

faithful81, Home Buyer in Whittier, CA

Does interest rate depend on if the home is an FHA or Fannie Mae?

Asked by faithful81, Whittier, CA Sat Jan 7, 2012

Need Help please. Last night we met with our lender and he stated that because the Home we were purchasing was a Fannie Mae; the interest rate was higher. Orginally we thought the rate would be about 4% but we just found out that the rate would be 5.1% because it was a Fannie Mae home. The rate just seems too high.

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Sounds like the lender is trying to put you into a HomePath loan. Their rates may be slightly higher than FHA, but they have no mortgage insurance (which effectively adds 1.1% to FHA loan rates). Also, unless you put 5% down their costs are usually higher than FHA, but once again, there is no "pre-paid MI" required (which adds 1/2 point to loan costs). The lender you are using might be trying to cover the higher costs for the HomePath Loan by increasing your interest rate.

Other benefits of using HomePath lending - no FHA required repairs, no appraisal and they will often give you 3.5% towards recurring and non-recurring closing costs (you have to ask for this in the offer). Also, you CAN buy a Fannie Mae home with an FHA home, as long as it qualifies. There is no requirement to use Home Path.

Now, if you want to use HomePath and save the monthly MI charge (which assuming you are buying a $380K home, adds $349 per month to your payment) and the pre-paid MI (which on the same home would add $3,667 in up front costs, which can be added to your mortgage), then you might want to change lender's.

Call Chris Fenoglio at MetLife Home Loans. Their current rate for HomePath (eff Friday) is 4.625% with 5% down, at no points on a single family home. He is local and can be reached at 562-799-5799 (office), cfenoglio@metlife.com (e-mail), or 714-206-0990 (cell). I have several clients who have used him and are all extremely satisfied. He will give you a straight answer and will actually close the loan he talks to you about at the rate and cost he gives you. Good Luck, go get that house, and Dare to Dream.


Shel-lee Davis, QSC®
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RE/MAX Palos Verdes Realty
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1 vote Thank Flag Link Sat Jan 7, 2012
Even a 5.1% is a bargain rate dependent on loan amount and adjusted for risk with your credit score. There usually is a loan premium and often the lender will roll in the PMI insurance to jack up the rate so you can go in with 3.5% down. have a lender you trust and then get a 2nd opinion about the specifics in your market. The good faith estimate of closing expenses, GFE should cover the bases for the basis of the interest rate and risk adjustments and how PMI is being paid, in a lump sum or built into the rate.

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1 vote Thank Flag Link Sat Jan 7, 2012
You can get more details and comparison information on Fannie Mae HomePath financing and HUD FHA financing for your HomePath property at:

http://www.203kmortgagelender.com/blog/homepath-renovation-m…

This way you will understand the differences and which is best for you.

Best of luck
0 votes Thank Flag Link Sat Jan 7, 2012
It is very possible that because the home is Fannie Mae that your lender thought that maybe you wanted to use the Home Path loan that is offered on almost all Fannie Mae properties. A house can not not be FHA, it's a loan. Home path rates run higher than FHA, FHA runs higher than conventional. Have him explain it better to you and also talk to another lender to weigh your options.
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0 votes Thank Flag Link Sat Jan 7, 2012
Thank you all for your answers. We were pre-approved by 3 lenders all based on FHA; none mentioned that the rate would be higher if we ended with Fannie Mae home. As for credit scores My score is 803 and my husband in the 730's. We we willing to put down 5% but the interest is still 5.1. I just don't want to end up with the home I thought would soon be mind. I am on my way to check with a couple of banks. Thank you all.
0 votes Thank Flag Link Sat Jan 7, 2012
Faithful81,
The rate depends on several factors
Your Credit, assets, work history
The type of Loan - Guess what, they are not alike
Your Lender - Guess again, they are not the same

This is why EVERYONE should get PRE APPROVED for a loan PRIOR to looking at homes.
You would never have this question if you were pre approved before you looked.

Agents like myself, make sure you are pre approved so you are confident in what you are buying.

This question should be asked of your Loan Officer.

Harold Sharpe - Broker
So Cal Homes Realty
(951) 821-8211
harold@socalhomebuying.org
http://www.socalhomebuying.org
California Department of Real Estate Broker License # 01312992
0 votes Thank Flag Link Sat Jan 7, 2012
If the property meets FM guidelines then you can get a 30 year fixed loan. If you have to get a portfolio loan product the rates will be lower but the fixed rate portion will be shorter, so this may be why the rate is higher.

For example, we just bought a home recently and the 30 yr fixed rate was about 5 percent, but we got a 7 yr fixed (30 year loan, just fixed rate for 7 years) at 3.85%.

Whether or not it makes sense for you to get a 30 yr fixed loan depends upon your situation. We decided to go shorter term because we have never lived in a home more than 5 years and would save about $60K in interest versus the 30 year loan.

And as stated below, rates are affected by several factors - income, debt, credit score, etc...

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
0 votes Thank Flag Link Sat Jan 7, 2012
It would be wise to engage a local Mortgage Broker with your questions. http://www.trulia.com/voices/directory/90604-mortgage_broker…
0 votes Thank Flag Link Sat Jan 7, 2012
Hello,

Typically Fannie Mae financing does not offer higher interest rates. Financing terms are based on your whole credit package and credit worthiness. The lowest rates are usually offered to the borrowers with the best credit. You have the option to interview several lenders to find the best financing terms.

Thanks,
Carol Perdew
Prudential California Realty
(209) 239-7979
Carol@PerdewHomes.com
http://www.CentralValleyHomes.com
DRE 985176
0 votes Thank Flag Link Sat Jan 7, 2012
Hi, Keep in mind, rates are dependent on your level of risk...which encompasses your credit worthiness, and financial status. The investor can add to the rate if neeeded.

Sincerely,

Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
William Raveis Legends Realty Group
914.406.9023
0 votes Thank Flag Link Sat Jan 7, 2012
Your interest rate is based on a few things but your credit score is the biggest part. I always tell buyers to talk to at least three lenders before deciding. Sounds like the one you've spoken to might not be the one!
0 votes Thank Flag Link Sat Jan 7, 2012
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