What is the best type of mortgage for you?
There are several types of mortgage available for
borrowers to choose from. Conventional loans, FHA Mortgage, VA Mortgage, High
Balance Loan, and Jumbo Loans.
Types of Mortgages Available and Your Options
Conventional, FHA Or VA Mortgage?
Conventional loan would require the mortgage
borrower to come up with at least 5% as down payment on a single family home,
Multi family, condo as long as the loan size is $ 424,100 as of Year 2017.
FHA requires
the mortgage borrowers to come up with 3.5% as a minimum down payment for
purchase. FHA has its own county limit on the loan size that borrowers can borrow
in this category. The advantages are that it has lenient underwriting. It
basically comes with two pre conditions. One is Upfront Mortgage Insurance
Premium and Monthly Mortgage insurance premium. FHA or Federal Housing Agency
essentially vouches that in the event of default by the borrower on his housing
payment the sum shall be made good by the agency to the bank. So banks having a
cushion feel comfortable in lending with a very low down payment of 3.55
however the borrower has to buy the policy to qualify for FHA by paying a
premium just the way you buy an insurance policy and then you make recurring
monthly payments as long as you are in FHA bucket.
The mortgage industry was hoping that for the year
2017 Monthly Mortgage Insurance premium will be brought down but that never
happened. Even if the borrower has a loan amount which is 80% of the value of
the home he still is required to pay mortgage insurance every month. Where as
in case of conventional the moment your new loan amount is 80% of the value of
the current home price, you can get mortgage insurance waived.
The present chart for FHA Monthly Mortgage Insurance is as per below for 2017:
2017 MIP Rates for FHA Loans Over 15 Years
If you take out a typical 30-year mortgage or
anything greater than 15 years, your annual mortgage insurance premium will be
as follows:
Base Loan Amount
|
LTV
|
Annual MIP
|
≤ $625,500
|
≤ 95%
|
80 bps (0.80%)
|
≤ $625,500
|
> 95%
|
85 bps (0.85%)
|
>$625,500
|
≤ 95%
|
100 bps (1.00%)
|
> $625,500
|
> 95%
|
105 bps (1.05%)
|
2017 MIP Rates for FHA Loans Up to 15 Years
Homebuyers who can afford to pay off their loans
quicker and opt for a shorter term, such as a 15-year mortgage, will benefit
from lower mortgage insurance premiums, as follows:
Base Loan Amount
|
LTV
|
Annual MIP
|
≤ $625,500
|
≤ 90%
|
45 bps (0.45%)
|
≤ $625,500
|
> 90%
|
70 bps (0.70%)
|
> $625,500
|
≤ 78%
|
45 bps (0.45%)
|
> $625,500
|
78.01% to 90%
|
70 bps (0.70%)
|
> $625,500
|
> 90%
|
95 bps (0.95%)
|
How Long Will You Pay the MIP?
For loans with FHA case numbers assigned on or
after June 3, 2013, FHA will collect the annual MIP, which is the time at which
you will pay for FHA Mortgage Insurance Premiums on your FHA loan. They are as
follows:
Term
|
LTV%
|
Previous
|
New
|
≤ 15 years
|
≤ 78%
|
no annual MIP
|
11 years
|
≤ 15 years
|
78.01% to 90%
|
cancelled at 78% LTV
|
11 years
|
≤ 15 years
|
> 90%
|
loan term
|
loan term
|
> 15 years
|
≤ 78%
|
5 years
|
11 years
|
> 15 years
|
78.01% to 90%
|
cancelled at 78% LTV and 5 years
|
11 years
|
> 15 years
|
> 90%
|
cancelled at 78% LTV and 5 years
|
loan term
|
Current Up-Front Mortgage Insurance Premium
The UPMIP is currently at 1.75% of the
base loan amount. This applies regardless of the amortization term or LTV
ratio.
What is FHA Stream Line Refinance: About FHA Stream line and FHA
Mortgage Rates
FHA stream line is available to borrowers who
already have an FHA loan. In this category the borrower is not required to go
for a fresh appraisal and underwriting is lenient in terms of income and credit
score.
What is a VA Mortgage?
VA Mortgage is made available to such borrowers who
are an active duty military personnel, veterans and certain other groups.
The mortgage is guaranteed by Department of
Veterans affairs and one can even buy a home with no money down.
There is no mortgage insurance on VA Loan which is
an advantage to the borrower unlike conventional and FHA Loan.
- VA Loans do not have any pre payment penalty.
- Closing cost are lower in case of VA Loan.
What is a Jumbo Loan?
As long as the loan size is within $ 424,100 you
are ideally within Fannie guidelines. If you do exceed this limit but within
the loan size set by Fannie Mae. You are still in confirming loan bucket as
explained in below example where the loan size is higher than $ 424,100 but if
for your specific county like in our example we have taken Alameda county in
California for Single family home. We are still safe.
As an example: For Alameda county California, A
single family home with a loan size of $ 636,150 would be confirming as its
within the guidelines of Fannie mae and Freddie mac. Its easier for banks to do
such loans and even sell them to investors.
However if you cross this threshold for a Single Family
Home and you are in Alameda county. You are now into Jumbo Loan category.
Here there are bank specific niches as its portfolio
lending. The rates are generally higher and typically you should seek help from
an expert who understands the market and banks and lenders as to their policy
on underwriting, products and rates.
For more information on The Benefits of Using an
Independent Mortgage Adviser visit www.affordable-payment.com or call 323-705-3191 if you are a
California Mortgage borrower or If Texas Mortgage Borrower call 713-463-5181
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