Rate Question

[tscrutch]

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@Anonymous wrote:

I'm no expert, but my credit is a 640 mid mortgage score and I locked in a 4% rate using FHA with 3.5% down that's actually a down payment grant.... so, it seems like your rate should be better than mine. That said, in our August clsoing group, no one is getting a 3.56% even with good credit and large downs.

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We got a 3.375% rate with a low down payment and no points.

[Anonymous]

This are the break down we recieved. It sbased on 95% financing.

Conventional 4% today with option to buy down

 

FHA = 3.75% based on today’s with option to buy down (per red)

Take into consideration that event though the Conventional loan has a higher rate it's PMI will drop off when you reach 78% LTV. The FHA has a lower rate but you'll be paying PMI for the entire life of the loan. If you plan on keeping this house long term then it might be better to go Conventional. In your original post you stated you could do 20% down, if you do that then you'll save money by not having any PMI, and even though its a slightly higher rate your payments may actually be less than FHA with PMI.

[onstar]

The rate alone doesn't say too much. What's it costing you to get that rate?

And when you compare a Conventional with an FHA loan, the rate means even less. In addition to what Bruadair pointed out, the FHA loan has 1.75% UFMIP. You either need to pay that at closing out of pocket, or you can add it to the loan balance. On a $400K loan amount, that's $7,000.

If you're doing a 30 year loan, then the MIP on the FHA loan is 0.85%. In my experience, the PMI on the conventional loan are typically around 0.5% to 0.6% (in scenarios like this with 95% LTV and 780 FICO).

Anyway, don't get hung up on the rate alone. Look at the overall cost of the loan.