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Frequent Contributor
Autumnslight
Posts: 311
Registered: ‎07-08-2012
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Re: FHA updating policies

I can't imagine conventional will lower scores to qualify. If anything, they can afford to be even more picky now. People who could qualify for conventional but went FHA because of the reduced up front costs (like I was going to) will be more likely to turn to conventional mortgages now. People who went FHA because that's all they could qualify for should still be able to qualify for FHA, but it'll just cost them a heck of a lot more over the life of the mortgage. It kind of looks like lose/lose to me. I'm just hoping we don't see stricter qualifications for conventional come into play because of this.

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Super Contributor
ShanetheMortgageMan
Posts: 8,040
Registered: ‎09-28-2007
0

Re: FHA updating policies

Conforming (Fannie Mae/Freddie Mac), which is what most people refer to as "conventional", already just requires a 620 FICO score for their programs.  It's when you put less than 20% down then you need PMI, and PMI providers typically require a 660 score for that... but there is one PMI provider (Radian) that is OK with a 620 score up to 95% LTV (680 score needed for 95.01 to 97% LTV).

Valued Contributor
tooleman694
Posts: 2,296
Registered: ‎08-25-2011
0

Re: FHA updating policies

So are you telling me, if I have a 620 score. Its actually a 670 I can go conventional with 5 percent down and have a 45 percent back end

Super Contributor
ShanetheMortgageMan
Posts: 8,040
Registered: ‎09-28-2007
0

Re: FHA updating policies

Yes sir - assuming you can get an automated underwriting approval & you otherwise qualify.

 

Interest rates are higher on conventional vs. FHA given the same credit score though, but conventional's PMI is pretty competitve to FHA's now... even lower in most cases.  No mandatory upfront mortgage insurance premium for conventional either... and there is even an option where you can pay an a single upfront mortgage insurance premium in lieu of monthly PMI.  So you get a lower monthly payment, but higher up front costs.

 

http://www.radian.biz/sfc/servlet.shepherd/version/download/068C0000000SfzaIAC are the PMI charts for Radian so you can see how it breaks down by LTV & FICO score.  Top section is if you pay it monthly, and bottom section is if you pay the single upfront mortgage insurance premium once at the beginning of the loan.  With Fannie Mae programs, you can even finance the upfront mortgage insurance premium back into the loan (ala FHA financing) up to 97% LTV... I didn't even realize that could happen until 5 years ago when my mortgage insurance rep told me I could do that for a client, that was a happy day.

 

FHA is still more flexible (i.e. will approve more people) for people with owing judgments, tax liens, collections & charge-offs though.

Valued Contributor
tooleman694
Posts: 2,296
Registered: ‎08-25-2011
0

Re: FHA updating policies

Last time I was ran thru DU I got an EA1.

Established Contributor
jadeite788
Posts: 510
Registered: ‎09-25-2009
0

Re: FHA updating policies


ShanetheMortgageMan wrote:

Yes sir - assuming you can get an automated underwriting approval & you otherwise qualify.

 

Interest rates are higher on conventional vs. FHA given the same credit score though, but conventional's PMI is pretty competitve to FHA's now... even lower in most cases.  No mandatory upfront mortgage insurance premium for conventional either... and there is even an option where you can pay an a single upfront mortgage insurance premium in lieu of monthly PMI.  So you get a lower monthly payment, but higher up front costs.

 

http://www.radian.biz/sfc/servlet.shepherd/version/download/068C0000000SfzaIAC are the PMI charts for Radian so you can see how it breaks down by LTV & FICO score.  Top section is if you pay it monthly, and bottom section is if you pay the single upfront mortgage insurance premium once at the beginning of the loan.  With Fannie Mae programs, you can even finance the upfront mortgage insurance premium back into the loan (ala FHA financing) up to 97% LTV... I didn't even realize that could happen until 5 years ago when my mortgage insurance rep told me I could do that for a client, that was a happy day.

 

FHA is still more flexible (i.e. will approve more people) for people with owing judgments, tax liens, collections & charge-offs though.


I am a bit confused so , with the PMI is it better to pay upfront or monthly.  I am trying to save money.


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Valued Contributor
tooleman694
Posts: 2,296
Registered: ‎08-25-2011
0

Re: FHA updating policies

With my calculations, it was cheaper to pay it all up front.

Super Contributor
ShanetheMortgageMan
Posts: 8,040
Registered: ‎09-28-2007
0

Re: FHA updating policies

[ Edited ]

tooleman694 - Not many lenders will take an EA1 - plus it qualifies for higher PMI than the standard PMI rates in that link.  Your loan officer can tinker around with the info to see what exactly is triggering the EA1.  A larger down payment, lower DTI, or more reserves are the three big things that can be modified to see if they'd make a difference... credit is more difficult because you can't simulate a better credit report/score.

 

jadeite788 - it depends on how long you anticipate having the loan for, if you plan on making prepayments to the principal over the minimum required payments, and your FICO score & LTV so the premiums can be calculated.  A rough example - with paying the monthly PMI say with just making the minimum payments the monthly PMI would stay on for 5 years, and the 1 time PMI is 3.2% & the monthly PMI is .95% per year.... then over 5 years with the monthly amount you'd be paying 4.75% in PMI vs. the 1 time PMI of 3.2%.... and in that situation it'd be cheaper to pay the 1 time PMI of 3.2%.  These are numbers I am just making up/aren't accurate, but that is how one would determine if the 1 time PMI or the monthly PMI would be cheaper over the life of the loan.  It's something that when you apply you and your loan officer can go over the numbers/options to see what would be better for your situation.

Member
Jerroldtrice
Posts: 17
Registered: ‎06-08-2012
0

Re: FHA updating policies

Has anyone heard of the FHA requirements changing for the amount of reserves? My wife has a score just below 640 so we were told we would need 2 months of reserves. Then we got a call that the requirements were changed in January and that they now require FOUR months of reserves with a score below 640. We are scheduled to close by the 1st of March so we are scrambling to come up with more money. I can't find where it talks about this anywhere. Anyone know about this?

Super Contributor
ShanetheMortgageMan
Posts: 8,040
Registered: ‎09-28-2007
0

Re: FHA updating policies

Jerroldtrice FHA hasn't made any changes in their reserve requirements, what you are being told is a lender "overlay" guideline so it's specific to that particular lender.


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