FHA or CONVENTIONAL ?

[StartingOver10]

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@Anonymous wrote:

Just FYI - my lender allowed me to 'buy out' the PMI up front by taking a higher rate .125. It was worth it for us. So it's worth seeing if there are other options with conventional.

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^^^yes.  There are a couple of solutions for PMI.

• Lender Paid Mortgage Insurance (LPMI)
• Borrower Paid Mortgage insurance - monthly or a one time fee

If you have a seller contribution toward your closing costs, this can be a good option: one time fee paid at closing using the seller contribution.

Speak with your LO and run the numbers to see what works best for you.

[Anonymous]

You are kind of teetering on the middle of the seesaw here. With your credit and that size downpayment, FHA may give you a slightly lower payment up front, but the PMI will eventually drop off with conventional. If you truly see yourself staying here 10+ years, I would do a little bit of work to your credit to get to at least 680 and then go conventional.

[bhnole]

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@StartingOver10 wrote:

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@bhnole wrote:

What is the minimum credit score for the 5% conventional?

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AFAIK, the min score is 620 for a conventional loan. However, you will get hit pretty hard on the rate and PMI rate. I have heard that the interest rate and PMI rate improve greatly if your score is above 680 and you get much better PMI rates at 720 or above.  You get the best PMI rates at 760 and above.

PMI is a whole different approval process on top of the lender approval process. The lender submits your file to one of a very few PMI companies for them to accept or reject insuring the loan.

For FHA MIP (Mortgage Insurance Premium) is automatic and the same rate regardless of the score.

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Just got a collection item deleted that got my mid score up to 724 which was a real turnover 5 years post chapt 7.   Just hope the mid score holds over 720 now with Mortgage inquiries.   Wells Fargo confirmed the mid score yesterday for me during the pre approval process. 

So far I have been quoted 4% (Wells Fargo) and 4.25% (Mortgage Broker) interest rates on a 30 years fixed with 5% down.   Should I expect a better rate once I get a contract and start the formal application process?

[StartingOver10]

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@bhnole wrote:

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@StartingOver10 wrote:

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@bhnole wrote:

What is the minimum credit score for the 5% conventional?

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AFAIK, the min score is 620 for a conventional loan. However, you will get hit pretty hard on the rate and PMI rate. I have heard that the interest rate and PMI rate improve greatly if your score is above 680 and you get much better PMI rates at 720 or above.  You get the best PMI rates at 760 and above.

PMI is a whole different approval process on top of the lender approval process. The lender submits your file to one of a very few PMI companies for them to accept or reject insuring the loan.

For FHA MIP (Mortgage Insurance Premium) is automatic and the same rate regardless of the score.

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Just got a collection item deleted that got my mid score up to 724 which was a real turnover 5 years post chapt 7.   Just hope the mid score holds over 720 now with Mortgage inquiries.   Wells Fargo confirmed the mid score yesterday for me during the pre approval process. 

So far I have been quoted 4% (Wells Fargo) and 4.25% (Mortgage Broker) interest rates on a 30 years fixed with 5% down.   Should I expect a better rate once I get a contract and start the formal application process?

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Rates fluxuate until you have a contract and can lock in so right now your rates are market rate. I am surprised the mortgage broker rate is higher. Is he just a broker or does he fund his own loans too? 

I am not a fan of WF because they give out pre-approvals all the time and then have difficulty closing. Find a good mortgage banker (someone that originates and funds their own loans).  WF is great at servicing mortgages. They buy a lot of mortgages after they are originated. Work with a mortgage banker that sells to Wells. You will have a better experience.

[bhnole]

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@StartingOver10 wrote:

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Rates fluxuate until you have a contract and can lock in so right now your rates are market rate. I am surprised the mortgage broker rate is higher. Is he just a broker or does he fund his own loans too? 

I am not a fan of WF because they give out pre-approvals all the time and then have difficulty closing. Find a good mortgage banker (someone that originates and funds their own loans).  WF is great at servicing mortgages. They buy a lot of mortgages after they are originated. Work with a mortgage banker that sells to Wells. You will have a better experience.

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They fund but he mentioned it was higher than what he would give if we were locking in right now.   I was looking for a payment guestimate and he was using a higher rate since he had no idea whether rates will hold with the Fed meeting this week. 

[StartingOver10]

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@bhnole wrote:

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They fund but he mentioned it was higher than what he would give if we were locking in right now.   I was looking for a payment guestimate and he was using a higher rate since he had no idea whether rates will hold with the Fed meeting this week. 

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^^^That is the right start. He originates and funds his own deals. Also he is giving you a payment using a slightly higher rate to account for the Fed meeting so he seems to be thinking through the whole situation. It is better IMO that he quote you at 4.25% and then when you find a place if the rate is lower lock you in at the lower rate. That way you are pleasantly surprised. That's the kind of LO I work with too -