Which Mortgage loan should I get

[asb2012]

I don't know which loan would be better ? Any opinions on which one and why? Purchase price $152200

FHA – 4.25% rate
Estimated monthly payment - $1108
Est. funds needed at close - $4827 (after $500 EMD credited)

Conventional – 4.99% rate
Estimated monthly payment - $1153
Est. funds needed at close - $4066 (after EMD)


EMD is my deposit I put down

[revisednut]

Does the FHA mortgage include PMI (lender mortgage insurance)?

[asb2012]

Yes it does

[kork13]

I know FHA loans are typically 30 year mortgages.... Are you able to move down to a lower-term mortgage, like 15-year or 20-year? Although the monthly payment will be a little higher, your interest rate will be lower, and you'll be able to pay off the mortgage MUCH faster. When I bought my house (loan amount of $130k), the difference in payment was almost 50% higher ($600/mo vs. $880/mo for P&I), but going with the 15-yr loan is saving me OODLES in interest payments. My rate was a full 1% lower, and I'm saving $8k of interest just in the first 5 years, and $58k over the full course of the loans. Some will suggest that you get a 30-year mortgage & pay it off faster... That helps, but you miss out on the lower interest rate that is available with the shorter term. ..... My $.02

side note, btw... I hope you're planning on making a more significant downpayment than $500 on a $150k mortgage... Not having a suitable downpayment (at the very least 10%, preferably 20% or more) is just asking for trouble.

[Petunia 100]

Yes it does

Is it included in the payment amount you gave, or is it additional?

[asb2012]

In the amount I gave

[Jerry91]

I personally feel that FHA loan will be a better option for you if you have the required fund that is needed to close down the loan.

[snafu]

Sorry, I have more questions than answers as this is serious stuff. Please understand that mortgage payment [amotorization] schedules pre-load interest and make you pay the interest first. [If you sign up for a 30 yr. mortgage, you'll pay nearly three time the original loan]. .. of the $1105. or $ 1183. monthly payment each month, how much pays for PMI, how much to interest, how much to property taxes and how much to the actual mortgage sum borrowed? How much or what percentage will you add to $ 500. deposit for downpayment? How much of an emergency fund do you have? How will you fund upkeep and maintenance? A house needs a passel of stuff not needed in a rental like garden/snow equipment, tools etc. Do you owe consumer debt like car payments, CCs etc ? Do you have SLs? Something has caused you to be approved at a higher rate than published.

I'm sure you can do this armed with facts so that you understand how the money is spent. What is included in closing costs? Is there anything to be done to lower those costs? They seem high based on the purchase price.

[btctony]

I personally feel that FHA loan will be a better option for you if you have the required fund that is needed to close down the loan.

Is PMI the same amount per month no matter what is owed on the mortgage or does it get lower as you get closer to paying the loan off?

So for a 30 year FHA loan, $150K, 10% down, after calculating PMI based on the loan amount and the insurance rate, lets say it is $66/month. Are you paying that $66/month for the entire 30 years assuming that the person takes the entire 30 years to pay off the loan or does it decrease with the balance on the loan?

[dczech09]

Is PMI the same amount per month no matter what is owed on the mortgage or does it get lower as you get closer to paying the loan off?

So for a 30 year FHA loan, $150K, 10% down, after calculating PMI based on the loan amount and the insurance rate, lets say it is $66/month. Are you paying that $66/month for the entire 30 years assuming that the person takes the entire 30 years to pay off the loan or does it decrease with the balance on the loan?

Private Mortgage Insurance (PMI) costs approximately $75 per month for every $100,000 borrowed. As your mortgage balance goes down, PMI goes down too.

With that said, PMI is only required when you debt-to-value is 80% or greater. Once you have at least 20% equity, and you prove it with an appraisal, you can have your lender drop the PMI.

PMI is an insurance policy that you pay for, but protects the lender in event that you default on the loan. So it actually does not benefit you, and is honestly pretty senseless to pay. This is why you should put down a 20% down payment.

[Petunia 100]

FHA changed their MIP rules as of June 3, 2013. According to their website, if you put 10% or more down, you must pay for 11 years or until the loan is paid off, whichever comes first. If you put less than 10% down, PMI is for the life of the loan. This is in addition to the MIP which is charged up front, no matter how much you put down.

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/fhahistory

Wow, that is expensive.


This is why I was asking earlier if the payments you quoted included PMI. (FHA calls it "MIP", but it amounts to the same thing). It really seems to me that they couldn't. Using Bankrate's calculator, the principal & interest payment for a 30 yr 152,200 mortgage at 4.99% is 816.11. At 4.25%, it is 748.73. That is a difference of 67.38 in favor of the FHA loan. You quoted a difference of $45, which leaves $22.38 per month to pay the PMI. That does not appear to be nearly enough.

According to this: http://www.google.com/url?sa=t&rct=j...UgewVy76ercFTg I calculate you should be paying about $162.50 for PMI per month the first year.


You might be better off to go with 80/10/10, where you take a conventional mortgage for 80% at a nice low rate, then a second mortgage for 10% at a higher rate, and put 10% down. The advantage is avoiding PMI. I suggest you ask your loan officer to run the numbers for you.
And I'd be asking for more clarification on the FHA PMI numbers.

[Rogerthat11]

I know FHA loans are typically 30 year mortgages.... Are you able to move down to a lower-term mortgage, like 15-year or 20-year? Although the monthly payment will be a little higher, your interest rate will be lower, and you'll be able to pay off the mortgage MUCH faster. When I bought my house (loan amount of $130k), the difference in payment was almost 50% higher ($600/mo vs. $880/mo for P&I), but going with the 15-yr loan is saving me OODLES in interest payments. My rate was a full 1% lower, and I'm saving $8k of interest just in the first 5 years, and $58k over the full course of the loans. Some will suggest that you get a 30-year mortgage & pay it off faster... That helps, but you miss out on the lower interest rate that is available with the shorter term. ..... My $.02

side note, btw... I hope you're planning on making a more significant downpayment than $500 on a $150k mortgage... Not having a suitable downpayment (at the very least 10%, preferably 20% or more) is just asking for trouble.

Great Post. I would take the one with lower the lower interest rate unless your planning on refinancing again. .5% interest is a lot in the long run, regardless of the costs now.