Wednesday, August 28, 2013

How To Get The Lowest Payment With The Lowest Down When Purchasing A Home

FHA loans can seem ideal for buyers with less than 5% to put down, however after you add the 1.75% UFMIP your actually putting 5.25% down. The best choice for lowest payment would be 5% down conventional financing LPMI, not BPMI.

FHA mortgages offer low rates and flexible guidelines. This article explains what option you should take if you are considering purchasing a home.


What Is The FHA Mortgage Program?



The FHA mortgage program is technically an insurance program. This is because the FHA is not a mortgage lender -- it's an agency which provides insurance to lenders for defaults or loan foreclosures. In order for a loan to be insurable, the lender must be FHA-approved and the specific loan must be underwritten to the standards set forth in the official FHA mortgage guidelines.


FHA mortgage guidelines are among the most forgiving of all mortgage loan types. There is no minimum credit score requirement. Some cases allow you to go up to 65% debt to income ratio. That is 22% higher than todays conforming loan DTI. If you have an income issue, FHA might be the way to go. Otherwise if your looking for the lowest payment and you dont have a DTI issue, LPMI is my recommendation. Here is why.


FHA vs LPMI vs BPMI



1. Cost Of FHA


3.5% down, plus 1.75% up front mortgage insurance premium. This is money paid to FHA for the policy. 1.35% monthly payment. That means you take 1.35% of the loan, divide that by 12 and add it to your payment.

Example: 3.625% rate
$420,000 purchase price. 
$405,300 loan amount. 
$22,050 down payment. 
$2,332 monthly payment not including tax and insurance.


3. Cos Of BPMI

5% down, plus up front mortgage insurance premium that varies on the provider, this is shop-able.

Example: 4.25% rate
$420,000 purchase price. 
$399,000 loan amount. 
$28,350 down payment. 
$2,228 monthly payment not including tax and insurance.


4. Cost Of LPMI



Example: 4.625% rate
$420,000 purchase price. 
$399,000 loan amount. 
$21,000 down payment. 
$2,051 monthly payment not including tax and insurance.

Take Your First Step Towards Your New Purchase



FHA loans account for a significant share of the U.S. housing market and it's EZ to understand why. The forgiving nature of the FHA mortgage guidelines, combined with the low rates available via the program, can make it a compelling mortgage option.

See how much home you can afford with an LPMI mortgage. Get started with a rate quote today.