19 Jul An interview with a loan officer
AN INTERVIEW WITH MIKE COADY EDGE HOME FINANCE
Many people ask me about the differences between FHA and Conventional financing, so we decided to interview an expert…Mike Coady with Edge Home Finance.
When asked about the benefits of FHA financing, Mike said: “It allows for consumers with lower credit scores the ability to obtain reasonable rates with a low down payment of only 3.5%. It also allows for a greater percentage of debt.”
When then asked about the benefits of conventional financing, Mike said: “The biggest benefit is the ability to drop private mortgage insurance (PMI), which is an insurance policy you pay for on the lenders behalf if you have less than 20% equity in your house. With FHA, the PMI is for the life of the loan.”
Which normally has the best interest rate? “Typically, the government-insured loans, FHA, has a lower rate. But they also carry upfront fees and a higher monthly mortgage insurance (MIP) payment (typically) than a conventional loan.”
Does FHA or Conventional allow you to have more debt? “FHA loans will allow you to have a higher debt to income ratio, up to 55% in some cases.”
What is the maximum purchase price in the Twin Cities for FHA and conventional? “FHA loan limits will vary by county, but the Twin Cities metro area is a max loan of $366,850.00 for a single family home, and the conventional loan limit in the metro area is $484,350.00 for a single family home”
If you already have an FHA or conventional mortgage at what difference between their mortgage rate and the current rate should they consider refinancing? “When it comes to refinancing there are some key issue for consideration. If you are looking to do a rate and term refinance, it is best to have a return on investment (ROI) inside of 36 months. If you are doing a cash out to consolidate bills or do a remodel, the rate is usually not a main driving factor (even though it is certainly important), the ability to complete your remodel or reduce your monthly outlay is the main objective.”
How long does it take to process a loan from accepted offer to close for FHA and conventional? “The typical time line from accepted offer to close is 30 days. We find that some can go faster that have clean files and clients who have a few past credit issues may take up to 45 days due to a few extra steps and documentation that may be required.”
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