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Can FHA financing save you money? Consider these examples…

Shawn Von Talge



02-12-2015

FHA Loan Program

It’s been well advertised, whether it be President Obama’s speech, Wall Street Journal Articles or some other medium of exposure about the recent change to FHA mortgage insurance premiums. However, many do not realize how this will impact them from a monthly payment stand point. In an effort to shed some light on what a big improvement this is, provided below are two examples that compare today’s costs of FHA financing versus that of conventional loan financing.

In the first example, we look at the cost of the FHA loan program versus that of a conventional loan with 5% down:

[table id=1 /]

In the second example, we compare the cost of the FHA loan program to that of a conventional loan with 3% down payment (please note: the 3% down conventional option is only available to eligible first-time homebuyers):

[table id=2 /]

ASSUMPTIONS: 700 middle credit score, $150K purchase price, 45 day lock, $1,500 annual real estate taxes and $800 annual insurance premium. Rates subject to change without notice and the individual PMI factor can vary depending on individual file characteristics.

As you can see, largely due to the recent decrease in FHA’s monthly MI fee, FHA financing can actually be a better option than a conventional loan depending on your individual goals and overall profile. Payment aside, FHA also affords borrowers more credit leniency when it comes to past derogatory items (i.e. bankruptcy, foreclosure, etc.) than does conventional financing. Additionally, as previously mentioned, the 3% down conventional program requires that at least one of the borrowers is a first-time homebuyer. To FHA’s credit this stipulation does not apply to their program, which only requires a 3.5% minimum down payment.

As always, consulting a mortgage professional is the best option to make sure you are getting the right program that best fits your goals, needs and long term strategy.

Thanks for reading!

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