What is the catch with the FHA loans?

[j]

I believe there is no PMI on FHA loans.

[Raybyrnes]

Not certain if it is the sam thing but might be worth looking at. When I applied for a federal student loan they typically came with a 3% fee. That was the maximum amount a Federal Lender could accept and interest rates wer set by the government so it was all the same.

Where lender differentiated themselves was by offering incentives. Those incentives often time incLUDED waiving the 3% origination fee provided I kept the loan with them for 2 years or offering interest rate reductions for setting up auto pay.

I’ll make a bet that FHA is very similar. If you shop around and ask what incentives a lender may offer as part of their program you may find the origination fee goes away.

That is a guess and based on my experience with Federal Student Loans.

[Raybyrnes]

Not certain if it is the sam thing but might be worth looking at. When I applied for a federal student loan they typically came with a 3% fee. That was the maximum amount a Federal Lender could accept and interest rates wer set by the government so it was all the same.

Where lender differentiated themselves was by offering incentives. Those incentives often time incLUDED waiving the 3% origination fee provided I kept the loan with them for 2 years or offering interest rate reductions for setting up auto pay.

I’ll make a bet that FHA is very similar. If you shop around and ask what incentives a lender may offer as part of their program you may find the origination fee goes away.

That is a guess and based on my experience with Federal Student Loans.

[Raybyrnes]

Not certain if it is the sam thing but might be worth looking at. When I applied for a federal student loan they typically came with a 3% fee. That was the maximum amount a Federal Lender could accept and interest rates wer set by the government so it was all the same.

Where lender differentiated themselves was by offering incentives. Those incentives often time incLUDED waiving the 3% origination fee provided I kept the loan with them for 2 years or offering interest rate reductions for setting up auto pay.

I’ll make a bet that FHA is very similar. If you shop around and ask what incentives a lender may offer as part of their program you may find the origination fee goes away.

That is a guess and based on my experience with Federal Student Loans.

[Raybyrnes]

Not certain if it is the sam thing but might be worth looking at. When I applied for a federal student loan they typically came with a 3% fee. That was the maximum amount a Federal Lender could accept and interest rates wer set by the government so it was all the same.

Where lender differentiated themselves was by offering incentives. Those incentives often time incLUDED waiving the 3% origination fee provided I kept the loan with them for 2 years or offering interest rate reductions for setting up auto pay.

I’ll make a bet that FHA is very similar. If you shop around and ask what incentives a lender may offer as part of their program you may find the origination fee goes away.

That is a guess and based on my experience with Federal Student Loans.

[Raybyrnes]

Not certain if it is the sam thing but might be worth looking at. When I applied for a federal student loan they typically came with a 3% fee. That was the maximum amount a Federal Lender could accept and interest rates wer set by the government so it was all the same.

Where lender differentiated themselves was by offering incentives. Those incentives often time incLUDED waiving the 3% origination fee provided I kept the loan with them for 2 years or offering interest rate reductions for setting up auto pay.

I’ll make a bet that FHA is very similar. If you shop around and ask what incentives a lender may offer as part of their program you may find the origination fee goes away.

That is a guess and based on my experience with Federal Student Loans.

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[SDEngineer]

[quote=j]I believe there is no PMI on FHA loans.[/quote]

It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.

The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.

In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).

[SDEngineer]

[quote=j]I believe there is no PMI on FHA loans.[/quote]

It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.

The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.

In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).

[SDEngineer]

[quote=j]I believe there is no PMI on FHA loans.[/quote]

It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.

The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.

In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).

[SDEngineer]

[quote=j]I believe there is no PMI on FHA loans.[/quote]

It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.

The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.

In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).

[Author]

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