FHA Local Limit Question / Stick with FHA or seek out Conventional

[Anonymous]

Just had my pre-con meeting on a new build and I have a few questions regarding my FHA loan (approved via AUS).

I have a local FHA limit of $339,250.  I'm under contract for a new build that costs $366,000 and I've already put down $5,000.

1.  Would my total down payment be $21,750 ($366,000-$339,250 = $26,750 - $5000 DP) to cover the deficiency between the FHA county limit and the cost of the house?

Or do I need to also put down an additional 3.5% of the home loan ($12,810) to cover the FHA down payment requirement? Note, I understand that closing costs will also be due upon closing.

2.  Is switching to a Conventional loan a better option with a middle score of 665?

Note:  The house will not be ready for another 4 months.

[homeloanexpert]

I, as a LO always run my borrower's loan application through the AUS and specifically Conventional first, and only default to FHA if needed in order to get an approval.

As far max loan amount,  you are good on your down payment. Your 3.5% is included in your calculation of $26,750.00.  You exceed the minimum d/p of 3.5%.

[Anonymous]

Thanks for the response.  My LO confirmed the same thing regarding the down payment over the weekend.  And he confirmed that an FHA loan would be better for me considering my credit score, down payment due, and proposed monthly payment for a conventional loan.  

[NC_Mtg_Loaner]

See if there is anything you can do in the short term in order to get that credit score up over 680 or even 720 and don't worry about being in a hurry to lock.   

If you are 4 months' away from closing you have plenty of time to boost your score and there's no worry about locking your loan because the longer period you have it locked, the more it likely costs you to lock and wait--therefore could increase the cost of your loan.     

[Anonymous]

Great point and thanks for responding.  Since I have gone through the FHA AUS already, what tips would you recommend to raise my score without causing issues with my pre-approval?   The only thing that sticks out to me is keeping my credit card balances low.  I don't want to do anything else that might disrupt the pre-approval.   Or am I being too cautious?

[Kasuito39]

OP congrats on your pre-approval. Please keep us posted on your progress.

[Anonymous]

Will do.  I learned today that closing will most likely be in January.  Thanks for the follow up.

[Anonymous]

Closed on 2/3/20 without issue.  Special thanks to everyone in this community for your help and feedback.