Is it worth shopping around for a mortgage lender? (Details included)

[hilarybanks]

Hello, I'm not sure how much information is needed for someone to help me with this. I'm buying a home by myself. I have steady employment, my salary is over $80K, and my credit score is 730. (It was 740 when I applied, but it dropped due to CC utilization...yes, like a dummy, I was using my credit cards the month before I applied for a loan. The mortgage company used the 730 score.)

The interest rate on the loan is 3.75% However, when all of the charges (PMI, etc.) are factored in, my estimated APR is 5.23%. This is the lender for my "big box" homebuilder (the mortgage arm for the builder); the seller (builder) is paying $5K towards my closing costs. Even with that $5K, I feel that my closing costs are high. I'm going to have to come out of pocket about $9,500 dollars on a $173,000 FHA loan (purchase price is $177,000). 

I'm wondering if it would be beneficial to shop around for a mortgage. I don't want my credit score to drop any further because it may affect my rate before it is locked, which will be at least another 30 days...

Advice??? If any other details are needed, let me know, please. I have the disclosures right in front of me with all of the information. It feels so overwhelming and there are not many homeowners in my family to ask for help. My real estate agent is okay, but she is not a financing guru or anything. 

[Mrs_hambright]

I would try to go 5% down conventional. No PMI for the life of the loan like FHA. Ask your loan officer if you could try for conventional.

[hilarybanks]

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@Mrs_hambright wrote:
I would try to go 5% down conventional. No PMI for the life of the loan like FHA. Ask your loan officer if you could try for conventional.

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Thanks. I also think the initial PMI would be lower with a conventional loan...I'm going to ask about that today. I think she did it as FHA because that is what I checked for the lower down payment; however the upfront PMI is so high, that I'm not really saving much upfront. Ugggh, this is so stressful. 

[ezdriver]

With small down payments, MI costs savings are not huge but being able to drop the MI at some point is a good thing for those borrower like you with good scores. Politicians have chosen to victimize the middleclass homebuyer with perpetual MI on FHA loans ... because we do not have the ability to fight back. Go conventional if you can.

[ShanetheMortgageMan]

With a 720-759 score and 5% down, the PMI on conventional would be .62%/year instead of FHA's 1.30%/year... or less than half.  Definitely go conventional if you can muster up the 5% down.  Interest rate will be higher, but the PMI savings will make up for it.

[hilarybanks]

Thanks, everyone. I called the loan officer and she said that with my credit scores, I would qualify for a conventional loan and she can send me a new GFE tomorrow. I guess I should be surprised that she didn't offer this to me as an alternative to save me money in the long run, but....yeah, I guess I have to watch out for myself. 

Instead of paying 3.5% down and 1.75% up front for mortgage insurance, I can pay 5% down (no up front mortgage insurance) and less per month.  You guys are geniuses. I'll update when I have more information. 

[jexxie]

I love happy endings!