Mortgage Loans

[JusdoNit]

Question: Is it better to pay FHA upfront mip at closing or have it rolled into my loan?  Does anyone know which would be cheaper? 

[JusdoNit]

Anyone????

[JusdoNit]

No one has an idea of how much the potential savings may be of paying the ufmip (fha upfront mortgage insurance premium) out of pocket? vs having it financed into your loan.

[Lel]

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JusdoNit wrote:

No one has an idea of how much the potential savings may be of paying the ufmip (fha upfront mortgage insurance premium) out of pocket? vs having it financed into your loan.

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There's no right answer to this.  The question you should be asking yourself is this: what is the opportunity cost of paying the UFMIP out of pocket versus rolling it into your loan?

Let's say your UFMIP is $5000.  If you roll it into your loan, then you're going to be paying interest on that money.  However, you might be a savvy stock market investor and feel certain that you invest the $5000 that you didn't put down to pay the UFMIP and get a better return than the interest that you have to pay.

So if you roll the UFMIP into your loan, pay 4% interest on it, but then take the $5000 and get a 6% return on your investment, then you've done well.  However, if the stock market tanks and your returns don't match the interest that you paid, then you would effectively lose money on the deal.

[hippychic823]

I was kinda wondering the same thing JustdoNIt...its like if you get it rolled into your loan it saves you a lot of money at the beginning of your loan (money to buy furniture/appliances/get utilities cut on, etc) but then again if you get rolled into your loan, you're gonna be paying interest on it, which costs more money in the long term. So, it really just depends on which option you're more comfortable with or which works best for your situation....

[Walt_K]

One thing to keep in mind here is what kind of credits you may have negotiated.  In our case, we had credits that exceeded our costs, so we paid the upfront MIP at closing so that we could take full advantage of the credits we were getting. 

[JusdoNit]

Ok.  Thanks for everyone's input.