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FHA vs Conventional - New PMI Rule and How Much Can I afford?

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Anonymous
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FHA vs Conventional - New PMI Rule and How Much Can I afford?

Hoping to get some community feedback on this ... I'm looking to buy my first home this year and wanted to get input on what makes the most financial sense. I make $47k and will have no debt by the time I buy. I've saved up nearly $40k to use as a downpayment - which will be well over 20% of the mortgage amount I'd be comfortable with. I'm currently in the First Home Club, which will give me about $7500 to use toward an FHA loan. I guess w/new FHA rules, I'd be paying PMI for the life of the loan. Would I be better off with an FHA loan and the grant money or should I look into a conventional loan? 

 

Also, given my income and downpayment. What sort of house prices should I look at? Mind you, I live in a very high tax area, our property taxes run around $3800 per every $100,000 of assessed value. Lucky us. Snow and high property taxes. Smiley Sad

 

Message 1 of 21
20 REPLIES 20
frugalQ
Valued Contributor

Re: FHA vs Conventional - New PMI Rule and How Much Can I afford?

If you are putting more than 20% down, PMI will not apply.

If you put more than 10% down, FHA PMI is not for the life of the loan. I think it's 11 years.

And, as of January, FHA changed the PMI rules. I believe they reduced the PMI rate...but not sure if they changed the length of time you have to pay it.
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Message 2 of 21
Anonymous
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Re: FHA vs Conventional - New PMI Rule and How Much Can I afford?

Thanks for the reply. I had been seeing things like: 

"The two MIP types are the FHA Upfront Mortgage Insurance Premium (UFMIP), and the FHA annual Mortgage Insurance Premium (MIP).

All FHA-insured homeowners are required to pay both insurance types and, for many FHA homeowners, FHA MIP lasts for the life of the loan -- up to 30 years." from the Mortgage Reports and "On loans closed June 3, 2013 and thereafter, there is no way to stop  paying FHA insurance premiums except by paying off the loan balance completely." 

 

It led me to believe that on a new FHA loan, I'd be paying PMI for the entire loan ... 

 

Message 3 of 21
Anonymous
Not applicable

Re: FHA vs Conventional - New PMI Rule and How Much Can I afford?

The NYgirl posted-

 

"Would I be better off with an FHA loan and the grant money or should I look into a conventional loan? "

 

It depends.  I think yours is not a clear cut case.  Find a LO, and have him run the numbers.  Once he has the details he can lay out the options and advise what is the best way forward.  Scenarios will be-

 

-put all 40k down on the house on a conventional loan.  Nothing wrong with that. 

 

-put half down on a FHA, take a few dollars out to buy stuff for the house or a little fixing up, put the rest in the bank.  

 

In the realm of thing, paying thousands down more than essential, while not bad, might be money better somewhere else.

 

I commend you on having 40k in the bank on a 47k salary.  Well done.  And if you wanna escape high taxes and snow, follow I-95 south, and there ya go! Smiley Happy

Message 4 of 21
frugalQ
Valued Contributor

Re: FHA vs Conventional - New PMI Rule and How Much Can I afford?

Here's the link to the article Shane posted back in regarding the changes to FHA mip.  He does state that there's no changes to the length of time of paying mip.  however, you do not pay mip for the entire length of the loan if you put 10% or more down.  and if you put 20%, you won't have any at all.

 

http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-reducing-mortgage-insurance-in-late-January/m-p/3...

 

now, as far as fha or conventional, if you are putting 20% down, i would go with fha for the lower interest rate since pmi will not be an issue.  if you are putting less than 20% down, i would shop around and see which program best fits.  there are now 3% down conventional loans for first time home buyers. 

AmEx Green NPSL | Amex BCP 16K | Citi Simplicity 10k | Discover IT 9K | Chase Slate 7.5K | Amex Hilton HHonors Surpass 7K | Capital One QuickSilver 6K | Home Depot 5k | Chase Freedom 4.5K | LOC 2.5K
Message 5 of 21
Peter1142
Established Contributor

Re: FHA vs Conventional - New PMI Rule and How Much Can I afford?

I am skeptical you would be able to buy a house in NY and be able to put 20% down with 40k to go towards down payment and closing costs... where exactly are you looking to buy, I assume somewhere upstate?

Message 6 of 21
Anonymous
Not applicable

Re: FHA vs Conventional - New PMI Rule and How Much Can I afford?

Yes. WNY. Thankfully, much of the rest of the state that is attached to NYC has affordable housing. 

Message 7 of 21
madmann26
Valued Contributor

Re: FHA vs Conventional - New PMI Rule and How Much Can I afford?

My conventional mortgage insurance is $83/month.

That is with 5% down.

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Message 8 of 21
ezdriver
Senior Contributor

Re: FHA vs Conventional - New PMI Rule and How Much Can I afford?

I believe that one pays upfront PMI on an FHA loan no matter how much down payment is made. One of loan officers here will chime in to correct me if I'm wrong.

Message 9 of 21
Anonymous
Not applicable

Re: FHA vs Conventional - New PMI Rule and How Much Can I afford?

I'm going with a FHA Conventional. When I initially started with the FHA loan i was required to pay the upfront PMI but since I converted it to the FHA Conventional I dont have to pay the upfront PMI. I am still required to pay the PMI but just not upfront. My monthly PMI will be $75.

Message 10 of 21
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