Broker telling me to go FHA over conventional due to "assumability"? (PMI, loan)
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Right now I'm looking at either an 80/10/10 or FHA mortgage...a conventional 80/20 is out of the question. The funny thing is the FHA interest rate is coming in lower than the primary 80 (about 5 versus about 4.75). Also, based on my timeframe (sell within 5 years or so), he says to go FHA because it will be assumable. The closing costs will be higher and the PMI may not be deductible depending on my income. Even so, he says FHA all the way.
Right now I'm looking at either an 80/10/10 or FHA mortgage...a conventional 80/20 is out of the question. The funny thing is the FHA interest rate is coming in lower than the primary 80 (about 5 versus about 4.75). Also, based on my timeframe (sell within 5 years or so), he says to go FHA because it will be assumable. The closing costs will be higher and the PMI may not be deductible depending on my income. Even so, he says FHA all the way.
What does everyone else think?
The FHA rate might be lower but you will be paying .50% in mortgage insurance. So the real rate of the fha loan is 5.25%.
Every lender i deal with has conventional rate mortgages at 4.875% today with a few at 4.75%. If you can qualify conventionally, go that way. Better overall deal and less in closing costs. FHA will charge you a 1 time upfront fee of 1.75% of the loan. ON a $200,000 mortgage that is an additional $3500 in costs.
If you are certain you will be selling in less than 5 years, a 5 year ARM rate will be around 4% or less.
Right now I'm looking at either an 80/10/10 or FHA mortgage...a conventional 80/20 is out of the question. The funny thing is the FHA interest rate is coming in lower than the primary 80 (about 5 versus about 4.75). Also, based on my timeframe (sell within 5 years or so), he says to go FHA because it will be assumable. The closing costs will be higher and the PMI may not be deductible depending on my income. Even so, he says FHA all the way.
What does everyone else think?
You should compare your 2 options above to a 90% conventional loan with single premium PMI. Assumability can be a nice selling point, but kind of a crap shoot. It does not get utilized all that much and I wouldn't have it be my focal point of which loan type to go with.
I am not an expert in any way shape or form, but 75% of the houses being sold in my neck of the woods are going FHA for the assumability as well.
It never USED TO be utilized much, but with the projection of interest rates I believe it will be in the future.
At the end of the day it is a gamble, just like your home purchase. If interest rates increase significantly, there is money to be made with an assumable mortgage(pending you sell), if they drop, stay stagnet, or you don't sell your home you have lost the extra you paid FHA each month. It can also make your home more attractive if the interest rates increase and the market drops-your home will be more attractive than one without the assumable mortgage-and every advantage helps.
We took the chance, don't know what our future holds, but it was a small gamble compared with the purchase price, so why not
An assumable mortgage is a great selling point and I believe that rates will definitely be higher - but don't forget, the next buyer still has to qualify to assume it...
Why buy a house and then sell it 5 years later? Most of the money that you pay towards your mortgage is going towards interest and not principal. If you had a $200K mortgage at 4.75% for 30 years, after 5 years you would have paid $45,592 in interest and only $17K in principal. When you sell you figure a 5% realtor commision which would be 10K (assuming property values stayed the same). This is also not taking into account property taxes, home owners insurance, repairs, maintenance, ect. I did not assume property value gains or taxes because I do not know what market you are in. This is just to give you more information to make your own decision.
Right now I'm looking at either an 80/10/10 or FHA mortgage...a conventional 80/20 is out of the question. The funny thing is the FHA interest rate is coming in lower than the primary 80 (about 5 versus about 4.75). Also, based on my timeframe (sell within 5 years or so), he says to go FHA because it will be assumable. The closing costs will be higher and the PMI may not be deductible depending on my income. Even so, he says FHA all the way.
What does everyone else think?
If you do not have 20% down then i would go FHA on this one and take a 4.25% interest rate on a 5 year arm. I just streamlined my own FHA mortgage from a 30 year at 5.875% to a 4.00% interest rate back in October of 2009. Saved over $400.00 on my $300+ loan amount. Plus FHA - the streamline option is great to have. Mike De.
Thanks for the tips folks. If I had to do it, I probably could make 20% down work, however I like to diversify my investments.
I'm buying in a high growth area and am banking on a moderate increase in the value of the property. It is in one of the hottest areas of the Pittsburgh region. Plus, I love the area but am sick of paying $1200+ in rent. My mortgage + taxes + insurance should put me in right around that number. Oh and the $8,000 tax credit! I'm self-employed so the government has been sticking it to me for a long time. Giving the government $8,000 less this year will bring me much joy, both financial and non-financial :-)
banking on a moderate increase in the value of the property. It is in one of the hottest areas of the Pittsburgh region.
Whoa! No offense meant, and I do try to read the newspaper coverage of areas across the country that are doing better than average, so I know that PNC is doing OK as far as bigger banks go, and CMI is still pretty hot, but I wish to present some articles that should temper your enthusiasm:
2nd UPDATE:Murtha, Major Force In Defense Spending, Dies At 77 - FOXBusiness.com (http://www.foxbusiness.com/story/markets/industries/nd-updatemurtha-major-force-defense-spending-dies/ - broken link)
Now maybe I am way wrong, but taken together I see the "pipe dreams" about green energy being contrasted against the reality of allegedly smart firms like Siemens saying at least some kinds of technology are simply not worth pursuing, and giving back grants to the government. I also note that the largest force in bringing that government funding to Western PA being DEAD and his heir apparent saying , in effect, "those days are gone"...
Now I am generally a pretty optimistic and realistic person, so for me to say "hey buddy any hot area can cool off real real fast" is NOT meant as a slam, just a gentle reminder that if you CAN afford to handle 20% but you CHOOSE not to please don't SPEND any of the fake "extra money" but hang on to it if things cool way off. OK?
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