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Not Sure What to Do - Conv. or FHA?

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Not Sure What to Do - Conv. or FHA?

Here's the dilema.  NFCU has approved me (pending appraisal) for a 4.5% refinance w/cashout CONV.  The stipulation is, they will pay off my debts and CLOSE all my credit cards.  I have another approval (again pending), 3.5% refinance w/cashout FHA.  No stipulation.  I'm just not a fan of mortgage insurance.  My montly payment for both is the same.  Only difference is what impact would closing all my cards have on me?  I have no idea what route to take.

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Re: Not Sure What to Do - Conv. or FHA?

What are the APRs?   With interest rates or APRs so low, it's not really that much of a big deal really.   

 

While your score takes an initial "hit" for closing accounts you'll likely see these 0% balance transfer offers that can be a great way to pay extra principle on your new mortgage if you pay it off during enrollment period. 

 

I am assuming the LTV on the FHA loan is 85%.  If you plan on staying in this loan (and home) for at least 15 - 20 years then you may want to go with the FHA loan because you'll have a lower base note rate when the PMI drops off in 11 years, but that's only if you value your future dollars and you don't expect to refinance again. 

 

If you take the 4.5% conventional loan you may be in a better position to refinance again next year or so on another dip in rates or when your credit improves. 

 

 

__________________________________________________

Licensed NC Mortgage Loan Originator
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Re: Not Sure What to Do - Conv. or FHA?


@MrSteel wrote:

Here's the dilema.  NFCU has approved me (pending appraisal) for a 4.5% refinance w/cashout CONV.  The stipulation is, they will pay off my debts and CLOSE all my credit cards.  I have another approval (again pending), 3.5% refinance w/cashout FHA.  No stipulation.  I'm just not a fan of mortgage insurance.  My montly payment for both is the same.  Only difference is what impact would closing all my cards have on me?  I have no idea what route to take.


I'm curious as to why you are doing the cashout refinance to pay off CCs? Have you tried a personal loan?





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Re: Not Sure What to Do - Conv. or FHA?


@NC_Mtg_Loaner wrote:

What are the APRs?   With interest rates or APRs so low, it's not really that much of a big deal really.   

 

While your score takes an initial "hit" for closing accounts you'll likely see these 0% balance transfer offers that can be a great way to pay extra principle on your new mortgage if you pay it off during enrollment period. 

 

I am assuming the LTV on the FHA loan is 85%.  If you plan on staying in this loan (and home) for at least 15 - 20 years then you may want to go with the FHA loan because you'll have a lower base note rate when the PMI drops off in 11 years, but that's only if you value your future dollars and you don't expect to refinance again. 

 

If you take the 4.5% conventional loan you may be in a better position to refinance again next year or so on another dip in rates or when your credit improves. 

 

 


 


The Conventional loan is 4.5 and the FHA is 3.5. If my credit will bounce back after closing all my accounts, I would be ok with that. I just didn’t know the impact that would have. That’s the big question. I planned on refinancing at a later date after my score improved thanks to no debt.

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Re: Not Sure What to Do - Conv. or FHA?


@nyyankees877 wrote:

@MrSteel wrote:

Here's the dilema.  NFCU has approved me (pending appraisal) for a 4.5% refinance w/cashout CONV.  The stipulation is, they will pay off my debts and CLOSE all my credit cards.  I have another approval (again pending), 3.5% refinance w/cashout FHA.  No stipulation.  I'm just not a fan of mortgage insurance.  My montly payment for both is the same.  Only difference is what impact would closing all my cards have on me?  I have no idea what route to take.


I'm curious as to why you are doing the cashout refinance to pay off CCs? Have you tried a personal loan?


 

 

I can’t get a personal. Tried. I also need to do home repairs and get the mortgage in my name. This covers 3 problems.
Message 5 of 9
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Re: Not Sure What to Do - Conv. or FHA?


@MrSteel wrote:

@NC_Mtg_Loaner wrote:

What are the APRs?   With interest rates or APRs so low, it's not really that much of a big deal really.   

 

While your score takes an initial "hit" for closing accounts you'll likely see these 0% balance transfer offers that can be a great way to pay extra principle on your new mortgage if you pay it off during enrollment period. 

 

I am assuming the LTV on the FHA loan is 85%.  If you plan on staying in this loan (and home) for at least 15 - 20 years then you may want to go with the FHA loan because you'll have a lower base note rate when the PMI drops off in 11 years, but that's only if you value your future dollars and you don't expect to refinance again. 

 

If you take the 4.5% conventional loan you may be in a better position to refinance again next year or so on another dip in rates or when your credit improves. 

 

 


 


The Conventional loan is 4.5 and the FHA is 3.5. If my credit will bounce back after closing all my accounts, I would be ok with that. I just didn’t know the impact that would have. That’s the big question. I planned on refinancing at a later date after my score improved thanks to no debt.


The APR on the FHA loan can't be 3.5% but those are the two figures from each loan to compare, but if you plan on refinancing again at a later date, why not get yourself into a 15 year loan now......Fast forward a year or two and you will have repaid quite a bit of that debt to the point that a new 20 year loan will be a nice fit.

 

 

__________________________________________________

Licensed NC Mortgage Loan Originator
Message 6 of 9
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Re: Not Sure What to Do - Conv. or FHA?


@MrSteel wrote:

Here's the dilema.  NFCU has approved me (pending appraisal) for a 4.5% refinance w/cashout CONV.  The stipulation is, they will pay off my debts and CLOSE all my credit cards.  I have another approval (again pending), 3.5% refinance w/cashout FHA.  No stipulation.  I'm just not a fan of mortgage insurance.  My montly payment for both is the same.  Only difference is what impact would closing all my cards have on me?  I have no idea what route to take.


Have you run your numbers? Doing a cashout refi @ 4.5 or even 3.5 will ultimately cost you more than any concerns you have over mortgage insurance over the same time period.

Message 7 of 9
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Re: Not Sure What to Do - Conv. or FHA?

I would never recomend to my client to refi with the requirement to close the accounts being paid off. I can assure you, the credit scores will feel the impact unless you have an excessive amount of accounts with late payments. The hit to the fee on a CONV for cash out is pretty steep effectively pushing the rate higher, while FHA loan level adjusters are way less.

 

FYI, The House of Representatives current have a bill to roll back the MMI on FHA loas to pre-Obama era. Obama changed the MMI from being self releasing and made it for the life of the loan.  Hopefully that accept of FHA will soon change. Back to your scenario, if the payment is the same, I would go with the FHA you can keep your accounts activated.

 

Also, if in the future the rates ever drop again (which I predict as soon as the recession hits), you can do a Streamline Rate Reduction or simply refi for a better rate or cut the term. At that time it will be a simple rate and term rather than a cash out. Just my oppinion.

 

Best of luck to you!

Mortgage Banker - Since 1988 offering FHA, VA, USDA, Conventional, Jumbo, Portfolio and NonQM Loan Products. Licensed in AL, AR, AZ, CA, FL, GA, IL, IA, IN, LA, MI, MO, NC, NE, NV, OH, OK, OR, SC, TN, TX, VA and WI.
Message 8 of 9
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Re: Not Sure What to Do - Conv. or FHA?


@homeloanexpert wrote:

I would never recomend to my client to refi with the requirement to close the accounts being paid off. I can assure you, the credit scores will feel the impact unless you have an excessive amount of accounts with late payments. The hit to the fee on a CONV for cash out is pretty steep effectively pushing the rate higher, while FHA loan level adjusters are way less.

 

FYI, The House of Representatives current have a bill to roll back the MMI on FHA loas to pre-Obama era. Obama changed the MMI from being self releasing and made it for the life of the loan.  Hopefully that accept of FHA will soon change. Back to your scenario, if the payment is the same, I would go with the FHA you can keep your accounts activated.

 

Also, if in the future the rates ever drop again (which I predict as soon as the recession hits), you can do a Streamline Rate Reduction or simply refi for a better rate or cut the term. At that time it will be a simple rate and term rather than a cash out. Just my oppinion.

 

Best of luck to you!


Regardless of PMI, won't the additional principal of the cashout amount plus the rolled in fees cause the borrower to ultimately pay more overall even with a reduced rate in the future. 

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