Which type a loan, would best suit my purchase?

Asked by Sheffs247, Troutdale, OR Thu Sep 23, 2010

We are buying a house out in Sandy. We are buying in for $192,000. We have a little more than $4,000 in cash. We have been approved for an FHA loan and a USDA loan. Also we were going to apply for the CHAP program. Which is a secondary interest free loan that can be put towards the down payment of the house. So the amount we would be getting would be around $11,000. We have been dealing with 2 lenders. Lender #1 thinks we should go USDA because its no money down, we don't have to pay anything back and there is no MMI. He is saying our closing costs will be around $4400. Lender #2 says we should do FHA because we could use the CHAP money and the MMI will drop off after 5 years. She is saying our closing costs will be around $8,500.
I don't know what to do!?!?!

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Douglas Bragg, Home Owner, Sandy, OR
Wed Oct 31, 2012
That is truly a quandry !

First off i suggest you ask lender #2 about the $8,500 closing costs. That to me seems high.

i suspect they added the down payment into the total to give you the $8,500.

That being the case both loans would probably be around the $4,500 mark or so.

Thus all things being equal ... I tend to like FHA. USDA can be troublesome depending

upon the county and the property you buy ... i.e. the home may need more repair than for FHA and may not even qualify after the appraisal is completed. Besides the Seller will have to pay some of the closing costs with FHA .. and should make your costs a bit less.

Good luck.

Doug

Douglas M. Bragg, Broker
Coldwell, Banker Seal

503-826-9207
0 votes
Sheffs247, Home Buyer, Troutdale, OR
Fri Sep 24, 2010
thank you guys for you answers. John that was especially helpful. It is seeming more and more like USDA would be the best way to go and just switch the CHAP program. Is it pretty common for the MMI to drop off at 5 years?
0 votes
Kim Noonan, Agent, New Lenox, IL
Thu Sep 23, 2010
Can you set up a little chart for yourselves and compare apples to apples to help make your decision?

Compare monthly payment to monthly payment
Up front/closing costs
Interest paid over the lifetime of the loan

That might help clarify things for you.

Also, I'm not familar with the CHAP program, but similar loans in my area sometimes have clauses that if you sell and/or refi the house within a certain period of years, you do owe some interest or some of the loan back. Does the CHAP program carry this kind of stipulation, and do you see that it might be a potential issue for you?

Best of luck on your home purchase and congratulations!
Web Reference:  http://www.kimnoonan.com
0 votes
Kevin Olson,…, Agent, Colorado Springs, CO
Thu Sep 23, 2010
Wow! That does sound confusing. I'm not a mortgage person, but as a Realtor I always tell my clients to ask for a fee schedule up front to compare to the other lenders. That way you know you aren't getting hosed with lender fees because you have more money available going a different route with financing. Most lenders (I like to think) are honest, but there are some that pull some odd things sometimes. Ask for the fee schedules and let them know you are comparing, just to keep everybody honest. That could save you a lot right there. Just like Realtors, there are lots of lenders and comparing fee schedules is fair to do. The ones who complain or say there is no need to compare, well, you can figure that one out. Good luck and I hope it works out well for you!
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