Today’s Topic: Big 3 Mortgage Program Refresher
It’s always a good idea to review the basics!
Conventional (Fannie Mae and Freddie Mac)
- 3% down for 1st time home buyer.
- 5% minimum down for everyone else.
- PMI rate moves with % down and credit score.
- PMI goes away once you have 20% equity.
- Option to buy-out PMI with a 1-time payment
- Gifts are allowed
- Interest rates are slightly higher than FHA/VA, but comparable.
FHA (Federal Housing Administration – part of HUD)
- 5% down.
- UpFront funding fee of 1.75% and Annual PMI of .85% on the vast majority of FHA loans.
- FHA will always have an annual MIP – usually lifetime but can be 11 years with a lot down and 15yr loan.
- Can only use for primary residence.
- Can’t have two FHA loans in the same area code – or so.
Based on a 200K purchase price with minimum down
- Conventional monthly PMI = $66.50 (with good credit)
- PMI paid after 5 years = $4,000
- FHA monthly PMI = $135.66
- PMI paid after 5 years = $8,000
Equity after 5 years (when making normal monthly payments):
- Conventional = $29,200
- FHA = $25,000
Sr. Loan Officer