FHA proposed changes VS new 97% loan to value program
The President is proposing that HUD lower the monthly mortgage insurance premium on FHA loans by .50 point from 1.35% for 96.5% loan to value loans to .85%.
I’ve done a comparison for you based on a buyer of a $150,000 single family property with a credit score of 700 & attached to this email.
A few points:
1. The payment on FHA Is lower initially, but the monthly Mortgage insurance can NOT be cancelled versus the monthly mortgage insurance on the 97% loan to value program can after approximately 5 years ( or 78% loan to value is reached based on original purchase price).
2. The My community mortgage program is a great conventional 3% down program that offers lower monthly mortgage insurance, but there are maximum household income guidelines that have to be met.
The 97% loan to value program has an initial higher monthly payment, but offers a slightly lower downpayment and the fact that the monthly mortgage insurance is cancellable, a savings of $27759 over the life of the loan if it’s kept all 360 payments is the gain for the borrower that chooses this program. The savings is a result of 300 months of a payment that’s $90.03/month lower than FHA and a $750 lower downpayment!
For borrowers with higher credit scores, the monthly mortgage insurance rate for the 97% loan to value purchase program is lower than in my example attached- resulting in an even lower payment!
The only catch is, on the 97% loan to value purchase program with Fannie Mae, at least one of the borrowers must be a first time buyer. No first time buyer requirement on FHA loans.
For your clients, I’ll determine the options they qualify for, and present all options available to your client & let them choose.
For buyers looking to build, construction loans still require a minimum 5% down payment, therefore none of these options apply, unless the client is taking out an end loan.
If you have any more questions, feel free to call or email me anytime.
Here’s to selling more homes in 2015.