February 23, 2023

Next month FHA is reducing the PMI on all FHA loans. This change should help buyers with financing and affordability. The PMI cut is 30 basis points across the board, but it brings PMI down on loan amounts between $625,000.00 -$726,000.00 by 50 Basis points. It also makes payments on an FHA loan lower than a conventional loan with 3% down. FHA rates are consistently lower than conventional rates, and the PMI cut will likely push FHA volume higher. FHA has an Up Front Mortgage Insurance Premium (UFMIP), and conventional loans don’t. With FHA, the PMI is with a borrower for the life of the loan. You can remove the PMI on conventional loans when you have 25% equity after 2 years or 20% equity after 5 years. FHA does not require a buyer to be a first-time buyer, but conventional loans with 3% down require the borrower not to have owned in the past 3 years. FHA is very lenient on credit scores, and their rates move slightly with lower scores. At the same time, conventional rates increase dramatically with lower credit scores. FHA does not increase a rate on a Condo or Townhouse, and Conventional loans do, but conventional loans don’t require that the complex get approved. Whatever your buyer chooses, it is always good to have options, and the FHA option improved dramatically yesterday!

Here is a comparison of FHA vs. Conventional!

Conventional 3% down – Purchase price – $600,000.00 – $18,000.00 down payment – $582,000.00 Loan Amount – 30-year Fixed rate 6.375% – $3630.92 Principal & Interest + $625.00 Property Taxes + $100.00 Insurance + PMI $155.21 = $4511.13 Total monthly payment

FHA 3.5% down – Purchase price – $600,000.00 – $21,000.00 down payment – $579,000.00 Base Loan Amount - with UFMIP = $589,132.00 loan Amount 30-Year Fixed rate 5.75% – $3438.01 Principal & Interest + $625.00 Property Taxes + $100.00 Insurance + PMI $265.40 = $4428.41 Total monthly payment

When the PMI Comes off the conventional loan, the payment will be $4355.92. So for at least the first two years, the buyer will save $82.72 per month with FHA, but after removing the PMI on the conventional loan, the buyer will save $72.49 per month going Conventional. You make the call! LOL! I would still go with conventional, but it’s close, and at a 720 credit score, FHA wins!!!

One more critical note! If your client is in escrow and closing in the next 25 days, please do not tell the lender they can have the lower PMI! The new rates will take effect on March 20th, and most lenders will only be able to get a buyer this rate right around that date.

Interest rates got better yesterday, and they are slightly better again today. The issue is Tuesday was a blood bath, and we have not picked up all of the corpses in the field yet. February has been ugly on the rate side, so let’s hope it closes strong and we can make more clients happy!

• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!
• Government Loans (FHA / VA) are in the low to mid 5’s.
• Conventional Loans up to $726,200.00 are in the low to high 5’s and low 6’s.
• High Balance Loans $726,201.00-$ 1,089,300.00 are in the low to mid 6’s
• Jumbo loans above $1,089,300 are in the low to mid 6’s
• 5/1, 7/1, 10/1 Arms are in the 5’s
• Bank statement loans - They are available with 10% down again! 7’s + depending on down and credit score.
• Stated income loans – 20% down with reserves! In the 8’s and 9’s!
• 0 down loans are in the high 5’s to low 6’s- 620 credit score min right now! Low 6’s, for the most part, up to $725,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - are typically 7.49% with limited fees – But they get you where you need to go!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I will be around all rainy weekend if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!