Loan Modification

New Mortgage Calculator Lets You Compare FHA with Conventional Loan

By Gina Pogol

A new mortgage calculator from mortgage insurer PMI allows you to see which home loan would cost you less on your next home purchase or mortgage refinance — FHA or conventional.
Until recently, when the cost of FHA’s upfront mortgage insurance premiums increased from 1.75% tp 2.25%, it was taken for granted that FHA was the cheaper option, all the time, end of story. But today, there are other considerations on both sides of the equation.

In This Corner, Risk-based Pricing Adjustments

Fannie and Freddie began implementing this scheme over a year ago, and it can get expensive for those with little down payments and small- to medium-sized credit issues. Oh, yeah, or condos. Or manufactured homes. Or multi-unit properties. They’re called loan level pricing adjustments and they can add up to five points to your loan fees.

And In This Corner, Up-front Mortgage Insurance Premiums

FHA, on the other hand, has countered with more expensive insurance across the board, for everyone. So, the program that works out to be best for you, the home buyer with the halo on your head and at least 5% down, may not be the best for the best one for the guy with the um, interesting past doing a cash-out refinance. It all depends.

Changes Ahead

Mortgage insurers have recently expanded their guidelines to be a bit more competitive (and forgiving!). On the other hand, FHA expects to decrease the upfront premiums once it can get an increase in the monthly charges approved. So make your calculations today, knowing that you may have to do them again in a month or so.

Full post as published by FHA Mortgage Guide on April 19, 2010 (boomark / email).