Preapproval : Which banks to try?

[FirstCAR_FirstHOME]

Hello,

myFico forums have been very helpful my first new car purchase..(2009 Honda Accord... Beautiful car)... and now I am trying to buy a home... Thanks a lot for all the great suggestions in advance and for all those very informative threads..

My Background: I have been working for 3 years at the same firm now.. (straight from school with a PhD) and now make $8100 per month (Gross salary) My FICO scores are TU 714  EQ 712 with a credit history of 4 years 8 months (average length: only 2 years, due to many cards opened in 2008 & 2009) I have $75K in savings in BoA.

I am looking to buy a house with a price tag around $250,000 for a primary residence(first home). I would prefer a low down payment ( 5%) and want to go for an FHA loan.

My question is which banks should I go to for a preapproval to get  low rates? Does having my savings account BoA help?  Are there any which I should definitely avoid?

Thanks a lot

FirstCAR_FirstHOME 

[Anonymous]

With your scores, you will probably be much better to pursue an conventional loan with 20% down.  I know that drains your savings a bit, but the rate you could get on a conventional loan with 20% down (maybe even do a 15 year loan) would be great as well as the fact that you would not have to pay the PMI or MIP.  You could then probably rebuild your savings fairly quickly with your income and with the lower house payment you would have.  That said, as far as picking a bank, talk to several within the same week.  Go with the one that seems to be the most upfront and on top of things.  IF tere rate is a bit higher or fees, see if you can play them against the other quotes you have recieved.

[Lel]

Here's a good thread to compare FHA vs conventional financing:

http://ficoforums.myfico.com/t5/Mortgage-Loans/Evaluating-Conventional-vs-FHA-VA-amp-USDA/m-p/696163...

Like mickie said, conventional financing is clearly an option for you, and you would save a lot of money by not having to pay the mortgage insurance premiums.  For a price tag of $250,000 and a 5% down payment, you'd have to pay an upfront MIP of 2.25%, or about $5400.  There's also the annual MIP of 0.5% (if you go with a 30 year term) of the original loan amount, which would come to an additional $100 per month on your mortgage payments.  You'd have to pay this MIP for at least 5 years or until the LTV drops below 78%.

That upfront 2.25% could be used to buy down the interest rate on a conventional mortgage, and could save you a considerable amount of interest payments over the term of the loan.

[FirstCAR_FirstHOME]

ickie08 & Lel,

Thanks so much for your great suggestions. I am so glad I posted my question here. 

With your mail, I figured I should be able to save around $11,400 over a 5 year period (2.25%: 5400 + 0.5% 1200*5=$6000)  which is a  lot of money.  At the same time, I am little worried for having to put down so much of money (20% of 250K = $50,000):

Below are my concerns:

1) I was hoping to actively invest the saved money for our retirement savings. I currently have only $20K in my 401K (I am almost 30 yrs old now.)  With most of the money gone for my home, I won't be able to do that.

2) We are kind of sure we will live in the new home for about 5 years, but will want to sell it around that time. Is putting down so much money right now a wise thing to do if  we want to sell it off after 5-7 years. May be its just my feeling and may be it does not matter... Your opinion will help me a lot on this one.

3) I guess having all that cash in hand had made us feel very safe. Assuming we find a home for 250K with property taxes around 4K per year and assuming I go for a 30 yr conventional loan with 20% down, do u think I can keep the mortgage payment around $1500-1700 ? (including property taxes... )

This will at least ensure that I can save around $25-30K by one year...  We won't be able to make fun trips over the year but we gain a brand new home, which is a lot!!

Thanks so much for sharing your thoughts....

NewCAR_NewHOME

[DallasLoanGuy]

Have a realtor refer you to a trusted loan officer.

The big banks don't always have the best deals.

A mortgage broker or mortgage banker will likely have better rates/fees

[BrianB_The_Loan_Professor]

The numbers used are date it is no longer 2.25/.5

now it is 1% and .9%

Not sure how that will play into your decision but the calculations are off

They collect less upfront now but have a higher monthly

[Anonymous]

fha vs conv.  it will come down to your preference.  It sounds hard to choose now, but once you go over the exact numbers with your lender it should be much easier.  as far as only planning on staying for 5 years, I don't think it should really make a difference in your decision between fha and conv.  With your credit you might actually wind up choosing a third option.  conventional 10% down and reduced pmi insurance.  I work at a big bank and if you wanted to go over the numbers with someone please find me on the net.