Loans Options–Advice Needed

[ninaprincess]

Hi,

I am buying a house at 460000 and putting 10% down. Below are the three otpions that the loan officer I work with provide. Which option you think is the best? Are these competitive or I should contact another Mortgage lender? This is my first time so I am clueless. Our income is 150000 and both have credit scores over 780.
thanks

All options are 30 yr fixed and zero points, meaning you don’t have to pay extra to get them.

Option 1: FHA Loan, Rate= 4.5
For this one, your loan amount would be $418,000 bc there’s an FHA upfront insurance fee of $4000.
Loan Amount: $418,000
Mortgage & Interest: $2118
Taxes: $431
Insurance: ~$90
PMI: $296
Total Monthly Payment: $2935

Evidently, there’s now conventional loans that allow 10% down, The other two options are two types of conventional loans.

Option 2: Conventional with 90% loan to value, Rate= 4.75,
Loan Amount: $414,000
Mortgage & Interest: $2159
Taxes: $431
Insurance: ~$90
PMI: $169
Total Monthly Payment: $2849

Option 3: LPMI(A type of Conventional loan) Rate= 4.875, but lender pays mortgage insurance
Loan Amount: $414,000
Mortgage & Interest: $2190
Taxes: $431
Insurance: ~$90
Total Monthly Payment: $2711

[Scarlett]

I think FHA is out. Option 2:
How many years will you have PMI at this rate?
N
N x $169 x 12 = X dollars
But after N years, your monthly payment goes back to 2159 for the rest (30 – N) years. While the option 3, it stays $2190 for the 30 years. $30 is not that much of a difference, but it can add up over years…. See after how many years you’d have spent the same amount on both option 2 and 3, Y > N.

[Scarlett]

I think FHA is out. Option 2:
How many years will you have PMI at this rate?
N
N x $169 x 12 = X dollars
But after N years, your monthly payment goes back to 2159 for the rest (30 – N) years. While the option 3, it stays $2190 for the 30 years. $30 is not that much of a difference, but it can add up over years…. See after how many years you’d have spent the same amount on both option 2 and 3, Y > N.

[Scarlett]

I think FHA is out. Option 2:
How many years will you have PMI at this rate?
N
N x $169 x 12 = X dollars
But after N years, your monthly payment goes back to 2159 for the rest (30 – N) years. While the option 3, it stays $2190 for the 30 years. $30 is not that much of a difference, but it can add up over years…. See after how many years you’d have spent the same amount on both option 2 and 3, Y > N.

[Scarlett]

I think FHA is out. Option 2:
How many years will you have PMI at this rate?
N
N x $169 x 12 = X dollars
But after N years, your monthly payment goes back to 2159 for the rest (30 – N) years. While the option 3, it stays $2190 for the 30 years. $30 is not that much of a difference, but it can add up over years…. See after how many years you’d have spent the same amount on both option 2 and 3, Y > N.

[Scarlett]

I think FHA is out. Option 2:
How many years will you have PMI at this rate?
N
N x $169 x 12 = X dollars
But after N years, your monthly payment goes back to 2159 for the rest (30 – N) years. While the option 3, it stays $2190 for the 30 years. $30 is not that much of a difference, but it can add up over years…. See after how many years you’d have spent the same amount on both option 2 and 3, Y > N.

[yellowS2K]

First factor you must think about is how long you plan to stay in the house. For each option, multiply the total monthly payment by the # of months, add the up-front costs, and then find out what your loan balance will be as of that time (a little harder to calculate, but most likely your loan officer can tell you, or better yet give you a table showing loan balance vs. life of loan assuming you don’t make extra principle payments). Knowing how long you’ll stay in a house can be tricky – for some it’s easy (you know you’ll need more space if you are planning to have kids, or to downsize if kids are leaving the nest, or maybe this is your dream house and you’ll be there for the life of the loan). But for must of us you need to just take a reasonable stab at it, perhaps by estimating what’s the minimum time you’ll be there and work from that even if it might be longer.

Second factor is when do you think you’ll be able to get enough equity to no longer have to pay PMI? If you can swing extra principle payments and get there faster, that might influence your decision. BUT… ask about if/when you can stop paying PMI for each option. I was told that for FHA you must continue to pay regardless of your equity position for the first 5 years. I looked around to try to confirm that just now and found only this on the FAQ for fha.com: The PMI cost “is borne by the homebuyer, but the insurance cost ends approximately five years later, or when the FHA mortgage balance is seventy-eight percent of the property value, whichever occurs last.”

Note the bit about “whichever occurs last” – so I think that confirms what I was told: minimum of 5 years regardless of equity position. That’s $17760 over 5 years that you are forced to pay unless rates are still low when you get to 20% equity and you can refi.

[yellowS2K]

First factor you must think about is how long you plan to stay in the house. For each option, multiply the total monthly payment by the # of months, add the up-front costs, and then find out what your loan balance will be as of that time (a little harder to calculate, but most likely your loan officer can tell you, or better yet give you a table showing loan balance vs. life of loan assuming you don’t make extra principle payments). Knowing how long you’ll stay in a house can be tricky – for some it’s easy (you know you’ll need more space if you are planning to have kids, or to downsize if kids are leaving the nest, or maybe this is your dream house and you’ll be there for the life of the loan). But for must of us you need to just take a reasonable stab at it, perhaps by estimating what’s the minimum time you’ll be there and work from that even if it might be longer.

Second factor is when do you think you’ll be able to get enough equity to no longer have to pay PMI? If you can swing extra principle payments and get there faster, that might influence your decision. BUT… ask about if/when you can stop paying PMI for each option. I was told that for FHA you must continue to pay regardless of your equity position for the first 5 years. I looked around to try to confirm that just now and found only this on the FAQ for fha.com: The PMI cost “is borne by the homebuyer, but the insurance cost ends approximately five years later, or when the FHA mortgage balance is seventy-eight percent of the property value, whichever occurs last.”

Note the bit about “whichever occurs last” – so I think that confirms what I was told: minimum of 5 years regardless of equity position. That’s $17760 over 5 years that you are forced to pay unless rates are still low when you get to 20% equity and you can refi.

[yellowS2K]

First factor you must think about is how long you plan to stay in the house. For each option, multiply the total monthly payment by the # of months, add the up-front costs, and then find out what your loan balance will be as of that time (a little harder to calculate, but most likely your loan officer can tell you, or better yet give you a table showing loan balance vs. life of loan assuming you don’t make extra principle payments). Knowing how long you’ll stay in a house can be tricky – for some it’s easy (you know you’ll need more space if you are planning to have kids, or to downsize if kids are leaving the nest, or maybe this is your dream house and you’ll be there for the life of the loan). But for must of us you need to just take a reasonable stab at it, perhaps by estimating what’s the minimum time you’ll be there and work from that even if it might be longer.

Second factor is when do you think you’ll be able to get enough equity to no longer have to pay PMI? If you can swing extra principle payments and get there faster, that might influence your decision. BUT… ask about if/when you can stop paying PMI for each option. I was told that for FHA you must continue to pay regardless of your equity position for the first 5 years. I looked around to try to confirm that just now and found only this on the FAQ for fha.com: The PMI cost “is borne by the homebuyer, but the insurance cost ends approximately five years later, or when the FHA mortgage balance is seventy-eight percent of the property value, whichever occurs last.”

Note the bit about “whichever occurs last” – so I think that confirms what I was told: minimum of 5 years regardless of equity position. That’s $17760 over 5 years that you are forced to pay unless rates are still low when you get to 20% equity and you can refi.

[yellowS2K]

First factor you must think about is how long you plan to stay in the house. For each option, multiply the total monthly payment by the # of months, add the up-front costs, and then find out what your loan balance will be as of that time (a little harder to calculate, but most likely your loan officer can tell you, or better yet give you a table showing loan balance vs. life of loan assuming you don’t make extra principle payments). Knowing how long you’ll stay in a house can be tricky – for some it’s easy (you know you’ll need more space if you are planning to have kids, or to downsize if kids are leaving the nest, or maybe this is your dream house and you’ll be there for the life of the loan). But for must of us you need to just take a reasonable stab at it, perhaps by estimating what’s the minimum time you’ll be there and work from that even if it might be longer.

Second factor is when do you think you’ll be able to get enough equity to no longer have to pay PMI? If you can swing extra principle payments and get there faster, that might influence your decision. BUT… ask about if/when you can stop paying PMI for each option. I was told that for FHA you must continue to pay regardless of your equity position for the first 5 years. I looked around to try to confirm that just now and found only this on the FAQ for fha.com: The PMI cost “is borne by the homebuyer, but the insurance cost ends approximately five years later, or when the FHA mortgage balance is seventy-eight percent of the property value, whichever occurs last.”

Note the bit about “whichever occurs last” – so I think that confirms what I was told: minimum of 5 years regardless of equity position. That’s $17760 over 5 years that you are forced to pay unless rates are still low when you get to 20% equity and you can refi.

[yellowS2K]

First factor you must think about is how long you plan to stay in the house. For each option, multiply the total monthly payment by the # of months, add the up-front costs, and then find out what your loan balance will be as of that time (a little harder to calculate, but most likely your loan officer can tell you, or better yet give you a table showing loan balance vs. life of loan assuming you don’t make extra principle payments). Knowing how long you’ll stay in a house can be tricky – for some it’s easy (you know you’ll need more space if you are planning to have kids, or to downsize if kids are leaving the nest, or maybe this is your dream house and you’ll be there for the life of the loan). But for must of us you need to just take a reasonable stab at it, perhaps by estimating what’s the minimum time you’ll be there and work from that even if it might be longer.

Second factor is when do you think you’ll be able to get enough equity to no longer have to pay PMI? If you can swing extra principle payments and get there faster, that might influence your decision. BUT… ask about if/when you can stop paying PMI for each option. I was told that for FHA you must continue to pay regardless of your equity position for the first 5 years. I looked around to try to confirm that just now and found only this on the FAQ for fha.com: The PMI cost “is borne by the homebuyer, but the insurance cost ends approximately five years later, or when the FHA mortgage balance is seventy-eight percent of the property value, whichever occurs last.”

Note the bit about “whichever occurs last” – so I think that confirms what I was told: minimum of 5 years regardless of equity position. That’s $17760 over 5 years that you are forced to pay unless rates are still low when you get to 20% equity and you can refi.

[ninaprincess]

Hi Scarlett,

After reading your post I called the loan agent and she didn’t exactly know about the lenght of time for paying PMI for option 2. She will check and call me back but she thinks it is either 2 or 3 years. If the appraisal after 2 or 3 years indicate that I have 20% equity then the PMI stops.

We plan to pay $1500 extra each month to reach that 20% equity. If we are able to do this, which option is better assuming PMI ends in 2 or 3 years?

[quote=Scarlett]I think FHA is out. Option 2:
How many years will you have PMI at this rate?
N
N x $169 x 12 = X dollars
But after N years, your monthly payment goes back to 2159 for the rest (30 – N) years. While the option 3, it stays $2190 for the 30 years. $30 is not that much of a difference, but it can add up over years…. See after how many years you’d have spent the same amount on both option 2 and 3, Y > N.[/quote]

[ninaprincess]

Hi Scarlett,

After reading your post I called the loan agent and she didn’t exactly know about the lenght of time for paying PMI for option 2. She will check and call me back but she thinks it is either 2 or 3 years. If the appraisal after 2 or 3 years indicate that I have 20% equity then the PMI stops.

We plan to pay $1500 extra each month to reach that 20% equity. If we are able to do this, which option is better assuming PMI ends in 2 or 3 years?

[quote=Scarlett]I think FHA is out. Option 2:
How many years will you have PMI at this rate?
N
N x $169 x 12 = X dollars
But after N years, your monthly payment goes back to 2159 for the rest (30 – N) years. While the option 3, it stays $2190 for the 30 years. $30 is not that much of a difference, but it can add up over years…. See after how many years you’d have spent the same amount on both option 2 and 3, Y > N.[/quote]

[ninaprincess]

Hi Scarlett,

After reading your post I called the loan agent and she didn’t exactly know about the lenght of time for paying PMI for option 2. She will check and call me back but she thinks it is either 2 or 3 years. If the appraisal after 2 or 3 years indicate that I have 20% equity then the PMI stops.

We plan to pay $1500 extra each month to reach that 20% equity. If we are able to do this, which option is better assuming PMI ends in 2 or 3 years?

[quote=Scarlett]I think FHA is out. Option 2:
How many years will you have PMI at this rate?
N
N x $169 x 12 = X dollars
But after N years, your monthly payment goes back to 2159 for the rest (30 – N) years. While the option 3, it stays $2190 for the 30 years. $30 is not that much of a difference, but it can add up over years…. See after how many years you’d have spent the same amount on both option 2 and 3, Y > N.[/quote]

[ninaprincess]

Hi Scarlett,

After reading your post I called the loan agent and she didn’t exactly know about the lenght of time for paying PMI for option 2. She will check and call me back but she thinks it is either 2 or 3 years. If the appraisal after 2 or 3 years indicate that I have 20% equity then the PMI stops.

We plan to pay $1500 extra each month to reach that 20% equity. If we are able to do this, which option is better assuming PMI ends in 2 or 3 years?

[quote=Scarlett]I think FHA is out. Option 2:
How many years will you have PMI at this rate?
N
N x $169 x 12 = X dollars
But after N years, your monthly payment goes back to 2159 for the rest (30 – N) years. While the option 3, it stays $2190 for the 30 years. $30 is not that much of a difference, but it can add up over years…. See after how many years you’d have spent the same amount on both option 2 and 3, Y > N.[/quote]

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