topic Re: FHA Limit Question? in Mortgage Loans

FHA Limit Question?

Hooosier — Sun, 23 Mar 2014 01:44:04 GMT

We are planning on purchasing our next home next spring (2015) and have a question about FHA. We are self-employed with net income of ~140K annually. Both of our credit scores are in the 760-800 range and would like to purchase a home in the 425K range.

On the HUD website it is showing a "one-family" limit of $271,050 for Hendricks County, Indiana. Does this mean we would not be able to get an FHA loan for a house in 425K range as we are planning for or am I misunderstanding? Would this mean we would have to go the conventional loan route?

Re: FHA Limit Question?

ShanetheMortgageMan — Sun, 23 Mar 2014 01:49:46 GMT

That is the FHA loan limit, so you can buy a $425k home but you'd have to put down $153,950.

With your credit scores if you have 5% down conventional would be a much better option - lower overall payment.

Was there any specific reason you were considering FHA financing over conventional?

Re: FHA Limit Question?

Hooosier — Sun, 23 Mar 2014 02:07:13 GMT

@ShanetheMortgageMan wrote:

Was there any specific reason you were considering FHA financing over conventional?

Not really - I am just starting to look into mortgage qualification and was just under the impression FHA would be the way to go. Forgive my ignorance, but what would make conventional better? Are interest rates better?

With our scores and income of around 140K what do you think the MAX we could be approved for a mortgage? We want to keep it around 425K but I'm just wondering what we could be approved for? We have monthly debts of right around 1.1K (auto loan and student loans).

Re: FHA Limit Question?

juggalo9er — Sun, 23 Mar 2014 02:59:29 GMT

that ackward moment when your in an online forum and someone in the same county posts a message...plainfield

Re: FHA Limit Question?

Hooosier — Sun, 23 Mar 2014 03:07:20 GMT

@juggalo9er wrote:
that ackward moment when your in an online forum and someone in the same county posts a message...plainfield

Brownsburg

Re: FHA Limit Question?

juggalo9er — Sun, 23 Mar 2014 03:09:49 GMT

howdy neighbor was just up there today...a few times

Re: FHA Limit Question?

BrianB_The_Loan_Professor — Sun, 23 Mar 2014 04:03:07 GMT

Conventional will help you in a couple of ways - First the loan limits is $417k so you will be able to buy in your range

second the Mortgage insurance is both less and not for the life of the loan (also FHA has a 1.75 upfront MIP)

FHA is not based on scores as much as conventional but your scores are about as good as they get so you should get the best pricing available

Conventional does require 5% down where FHA is only 3.5%

FHA is a great program and allows a lot of people to get into homes

these days though conventional is the better program mainly because of the mortgage insurance

Hope that helps

Brian

Re: FHA Limit Question?

ShanetheMortgageMan — Sun, 23 Mar 2014 09:06:30 GMT

@Hooosier wrote:
@ShanetheMortgageMan wrote:

Was there any specific reason you were considering FHA financing over conventional?
Not really - I am just starting to look into mortgage qualification and was just under the impression FHA would be the way to go. Forgive my ignorance, but what would make conventional better? Are interest rates better?

With our scores and income of around 140K what do you think the MAX we could be approved for a mortgage? We want to keep it around 425K but I'm just wondering what we could be approved for? We have monthly debts of right around 1.1K (auto loan and student loans).

From the numbers you provided your debt ratio should be fine for a $425k sales price with 5% down using conventional financing. Depending on how much property taxes run you'd probably cap out at around a $575-650k sales price price with 10% down.

Interest rates are actually higher on conventional financing than FHA financing, but like Brian mentioned FHA has a 1.75% upfront mortgage insurance premium (which conventional doesn't have) and also has a 1.30% annual mortgage insurance premium (if down payment is 5%+ & loan term is >15 years) whereas with your FICO score and 5% down conventional would have .54% (for a 760+ score). Conventional has some other mortgage insurance options like paying an upfront premium in lieu of having the annual amount. Conventional is a little easier going on the property condition as well.

Re: FHA Limit Question?

Anonymous — Sun, 23 Mar 2014 13:27:56 GMT

If you go FHA you will have a extra $400 + monthly insurance payment on top of your mortgage for the life off the loan. Conventional you will not! That is the big difference between them

Re: FHA Limit Question?

Hooosier — Sun, 23 Mar 2014 13:59:55 GMT

Thank you all for the help! So conventional is definitely the way to do.

I was looking at 30 year vs. 15 year loans it looks like with a 15 year we could save somewhere in the neighborhood of 250-300K over the life of the loan (is this correct?). Other than the different debt to income, are 15 year loans any harder to qualify for?

Re: FHA Limit Question?

BrianB_The_Loan_Professor — Sun, 23 Mar 2014 16:04:52 GMT

...... as long as the DTI is in line the approval guidelines for a 15 are the same as a 30

If you can afford it and are comfortable with the payment the 15 is the way to go -you will also get a better rate than the 30

If it is marginal and you are unsure about the payment working in your budget you could always go with the 30 and calculate what the 15 year payment would have been and send that in every month - that way if funds are tight at any given time you always have the option to make the smaller 30 year payment

Good Luck

Brian

Re: FHA Limit Question?

Hooosier — Mon, 24 Mar 2014 01:11:47 GMT

Is health insurance considered when calculating DTI? Being self-employed our health insurance premiums are rather high - $750 per month...would this be a factor they would consider?

Re: FHA Limit Question?

KAISMOM — Mon, 24 Mar 2014 06:19:30 GMT

Excellent question, curious myself as I'm also self employed and hoping to buy a house next year My impression is this would not factor into the DTI ratio as it can be written off the following year anyway. I'll be paying $433 (w/ subsidy) for myself and my child, and if that were to be factored in I'd never be able to buy a house! Either that or go w/o health insurance. Interested to hear from underwriters, real estate, banking folks. But my hunch is we're okay. Car & student loans are reported to credit agencies as an installment loan/debt whereas our monthly health premiums are not "debts" so therefore aren't factored in.

Re: FHA Limit Question?

ShanetheMortgageMan — Mon, 24 Mar 2014 15:55:50 GMT

Nope, health insurance (and other insurance, other than homeowners insurance) isn't included in the DTI.