September 13, 2022

I wanted to let you know a few differences between FHA and conventional lending regarding private mortgage insurance (PMI).

FHA charges an upfront mortgage insurance premium UFMIP of 1.75%, which they add to the original loan amount. There is also a monthly PMI charge of .85% if the loan amount is $625,500.00 or below. If the loan amount is above $625,500.00, then the PMI fee is 1.05% if it is above that amount. FHA PMI stays with the loan for the life of the loan unless you put 10% or more down, and it would release automatically after 11 years! PMI goes down by .05% if you put down 5% or more. If you put down 20% and get an FHA loan, you will still have PMI!

On a Conventional Loan, your rate is usually a bit higher, but PMI is generally less expensive and much easier to remove. If you have a good credit score and are putting 5% down, you will have a PMI rate of about .27%, and with 10% down, you could be looking at a PMI rate of .14%. So you can see the rates are lower, and we are basing that on a solid score. So if your score is not super strong, you may pay a little more. Conventional loans have higher rates on lower scores, and FHA doesn’t hit you as hard when your scores are not excellent. There are three ways to get rid of your PMI on a conventional loan, well, four if you want to get technical.

1. Pay your mortgage down to 78% of the original purchase price.
2. After 2 years, if you have 25% equity based on a new appraised value and current loan amount
3. After 5 years, if you have 20% equity based on a new appraised value and current loan amount
4. If you sell or refinance – LOL! Yes, that is getting technical.

I hope this is useful for you, and it also gives you an excuse to call your clients that put less than 20% down.

Interest rates had a rough go this AM, with the CPI coming in at 8.3%, up from a month ago. We also have lower gas prices, which should have helped! So this is pushing us towards a .75% hike at the next Federal Reserve meeting. What will that do to interest rates? It’s days like today that make the interest rates what they are and not when the Fed moves its needle!

• 30-year Government Loans (FHA / VA) are in the low 5’s.
• Conventional Loans up to $715,000.00 - low to mid 5’s. Yes, this changed on Monday!
• High Balance Loans $715,001.00-$ 1,072,500.00 are in the mid 5’s to low 6’s
• Jumbo loans above $1,072,500 are in the high low, to mid 5’s
• 5/1, 7/1, 10/1 Arms are in the low 4’s to low 5’s for over $647,201. Under that, don’t bother right now!
• Bank statement loans - They are available with 10% down again! 6’s + depending on down and credit score.
• Stated income loans – I have one bank with 30% down, but everything else has to be perfect! Interest rates are in the high 6’s.
• 0 down loans are in the 6’s – 620 credit score min right now! Mid 6’s, for the most part, up to $670,000.00.
• 0 down Jumbo to $975,000.00 – 680 credit score – call for a quote
• 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 6.99% 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 week if you have any questions or if someone interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 xt. 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!