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HELP! Teach home loans/mortgages and FHA loans to me like I'm an 8 year old
Posted on 6/4/13 at 3:21 pm
Posted on 6/4/13 at 3:21 pm
Background: I have average credit (720ish) with a couple credit cards I pay all off on time each month. I am gainfully employed with a great company but don't have much in savings since I am only 25.
I want a 250k (give or take 20k) home with a 30 year mortgage that I plan to pay off in 20. I don't have 20% of that in liquid to pay a down payment due to low savings. I have been told FHA is what I should do.
-Do FHA loans just mean they insure your loan from the bank, thus giving you smaller down payment and 3.5% interest rate?
-What do I have to pay to the FHA in insurance costs?
I want a 250k (give or take 20k) home with a 30 year mortgage that I plan to pay off in 20. I don't have 20% of that in liquid to pay a down payment due to low savings. I have been told FHA is what I should do.
-Do FHA loans just mean they insure your loan from the bank, thus giving you smaller down payment and 3.5% interest rate?
-What do I have to pay to the FHA in insurance costs?
7
Posted on 6/4/13 at 3:32 pm to TheCaterpillar
quote:
giving you smaller down payment and 3.5% interest rate?
I think you're confused here but I could be wrong. 3.5% is the min. down payment, not the rate.
Also, be prepared to pay PMI for the life of the mortgage as of June 1. Again, someone correct me if I'm wrong.
This post was edited on 6/4/13 at 3:33 pm
Posted on 6/4/13 at 3:32 pm to TheCaterpillar
quote:
-Do FHA loans just mean they insure your loan from the bank, thus giving you smaller down payment and 3.5% interest rate?
FHA was created for people cannot afford the 20% down payment(alot of people do this) on a house with a conventional loan. The required down payment is 3.5%, I believe. With FHA though, comes PMI monthly charge in addition to the mortgage, Homeonwers, and taxes. In your case, if you buy the house now, you will have to pay PMI for the life of the loan. Now Im not 100% sure but from all indications this is true.
quote:
-What do I have to pay to the FHA in insurance costs?
Depends how big the loan is, but I believe its 1%(maybe more now) of the total loan or purchase amount. Divide that number up by 12 and thats the monthly payment.
This post was edited on 6/4/13 at 3:33 pm
Posted on 6/4/13 at 3:33 pm to TheCaterpillar
quote:
-Do FHA loans just mean they insure your loan from the bank, thus giving you smaller down payment and 3.5% interest rate? -What do I have to pay to the FHA in insurance costs?
FHA only requires 3.5% for down payment so a good number of people go that route if they do not have a sizable down payment to go the conventional route....
The disadvantage is that at closing you will have to pay an upfront premium (will be in the $4k-5k range on the size house you are looking at). Additionally, the monthly insurance premium is a little bit higher going FHA than conventional.
If you have at least 5 percent to put down you can do an 80, 15, 5 loan and have a 1st and 2nd mortgage. This will eliminate the mortgage insurance premium but will likely be offset with the higher interest rate on the 2nd mortage (15% one). You will have to run the numbers and see what works best for your situation.
This post was edited on 6/4/13 at 3:35 pm
Posted on 6/4/13 at 3:42 pm to Cousin
I thought it was 3.5% down AND a 3.5% rate (depending on the time you get it)?
Do I go to a mortgage expert for this? Is that a thing?
Do I go to a mortgage expert for this? Is that a thing?
Posted on 6/4/13 at 3:42 pm to TheCaterpillar
And thank you for the responses! 
Posted on 6/4/13 at 3:45 pm to TheCaterpillar
Just on first impression, you don't need to be buying that much house quite yet.
Posted on 6/4/13 at 3:46 pm to TheCaterpillar
quote:
I thought it was 3.5% down AND a 3.5% rate (depending on the time you get it)? Do I go to a mortgage expert for this? Is that a thing?
It's 3.5% down and the rate varies by bank. If I were you, I would try and get quotes from at least 2 bankers minimum (3 would be optimal) to see what int. rate they can give you along with their fees. Compare what you get and decide to go with whatever person you feel comfortable with. I am a realtor that's why I am familiar with this stuff.
Posted on 6/4/13 at 3:51 pm to Broke
quote:
Just on first impression, you don't need to be buying that much house quite yet.
Where we are looking to buy is an investment. Its a neighborhood that is blowing up in a good way. Also, thats the cheaper end of houses within the radius we want to live of our jobs in Nashville.
Posted on 6/4/13 at 3:52 pm to TheCaterpillar
I must add, she has an 850 credit score and GREAT credit history. We can cosign stuff to help the rate.
And we both are gainfully employed with good careers under way.
And we both are gainfully employed with good careers under way.
This post was edited on 6/4/13 at 3:53 pm
Posted on 6/4/13 at 3:56 pm to TheCaterpillar
quote:
she has an 850
I'm calling bullshite. It took me 40 years to get to 820.
How much money do you have in savings? You said you had "little"
Posted on 6/4/13 at 4:03 pm to Broke
combined probably 20k and 10k in my 401k.
But we've both only been working a couple years.
She has that credit score because her dad has put high/no limit credit cards in her name since she started college and paid them off completely each month to set her up for life. He also put 2 cars in her name and paid them off for her throughout college. She has an outrageously awesome credit history.
But we've both only been working a couple years.
She has that credit score because her dad has put high/no limit credit cards in her name since she started college and paid them off completely each month to set her up for life. He also put 2 cars in her name and paid them off for her throughout college. She has an outrageously awesome credit history.
Posted on 6/4/13 at 4:04 pm to TheCaterpillar
Also, I'm sure we can get no interest loans from family if we need to make a bigger downpayment, I just really hate running to my daddy. Obviously she has no problem with it 
Posted on 6/4/13 at 4:26 pm to TheCaterpillar
You want to pay upfront PMI and do a 95/5 Conventional loan with your credit score, although with new lending laws income, not wealth, will be biggest factor
May be 850 on one of these website,her bank score will be awesome but lower
See you're in Nashville, so where are you buying that is blowing up just out of curiosity for 250k. If you need a realtor let me know. I also have great relationship with bank and our brokerage has in house mortgage lender
May be 850 on one of these website,her bank score will be awesome but lower
See you're in Nashville, so where are you buying that is blowing up just out of curiosity for 250k. If you need a realtor let me know. I also have great relationship with bank and our brokerage has in house mortgage lender
This post was edited on 6/4/13 at 4:33 pm
Posted on 6/4/13 at 4:39 pm to TheCaterpillar
if you can avoid an FHA loan, go conventional put down at least 5% and the PMI will be cheaper conventional if you have credit scores over 740. You need to sit down with a lender and talk this through.
Posted on 6/4/13 at 5:31 pm to TheCaterpillar
quote:
I must add, she has an 850 credit score and GREAT credit history. We can cosign stuff to help the rate.
Are the 850 and 720 credit scores FICO scores? If not, they won't mean anything to lenders. If so, you should still go conventional. Your rate will be determined by the middle score from all 3 bureaus. If you are co-borrowing, the lower of you and the co-borrower's score will be used. As for the loan for a down payment, I know FHA doesn't allow that. They allow "gifts" from family members, though. Good luck.
Posted on 6/4/13 at 6:05 pm to JonTheTigerFan
I was able to go conventional. 3% down, pmi was paid up front via a slightly increased interest rate of 4.25%. I ran the numbers and this option worked best for me... Compared to paying pmi separately/monthly. Hope this helps
Posted on 10/30/13 at 7:59 am to TheCaterpillar
quote:this is not the right type of thinking on a first home with zero experience or understanding of how real estate works, imo
Where we are looking to buy is an investment.
also 850 is bs
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