Home Purchase Mortgage Options With 15% Down Payment FHA or Conventional Loans?

Hi everyone, I’m a first time home owner and have no experience with home buying terminology. I do have a realtor at this time.

I’m looking to buy a single family home for about $ 250K – $ 300K max, prefer somewhere in the middle around $ 285K. My credit score is 784 from all 3 credit agencies. I have $ 60,000 cash for down payment. I have $ 0 debt. No car payment and Rent is $ 500 a month (rent a room). I own a $ 30,000 car and $ 5,000 car free and clear. My annual income is $ 60,000+ . I have been asking around and it doesn’t seem like I will be having trouble getting a loan.

I was looking at the FHA and conventional loan. since my down payment budget is $ 60,000. If I were to purchase a house with conventional loan of purchase price $ 285K and 20% down payment would be $ 57,000 that would leave me $ 3000 for closing cost which is cutting it really close. I was thinking about putting down 15% on a FHA loan $ 42,750 which would leave me $ 17,250 left for closing cost and MIP. The upfront MIP will be 0.0175 of the loan amount $ 24,2250 which will be $ 4240. I believe under the new FHA MIP I will have to pay the MIP monthly for 5 years until I can get the house appraised and have MIP removed. The monthly MIP will be $ 112 for 60 months that would be $ 6720. So basically if I go with FHA 15% down I will have to pay a total of $ 10960 for Mortgage Insurance.

What if I go with a traditional loan and put down 15% and get PMI for 2 years. So my confusion is should I do MIP or PMI if I only want to put 15 % down ? If you guys have any other suggestions please let me know. Thanks

3 thoughts on “Home Purchase Mortgage Options With 15% Down Payment FHA or Conventional Loans?

  1. I’d suggest doing anything you can to make sure you put down a full 20%. In your offer on a house you can ask the seller to cover all of your closing costs, or split them with you. I’d avoid mortgage insurance like the plague if I were you.

    ETA: I don’t know if these type of loan options exist anymore, but my sister did a first mortgage for 80% and a second mortgage for 10% and put 10% down and avoided PMI.

  2. golferwhoworks says:

    put 20% down and have the seller pay closing cost and go conforming. Now if you do less then you do know the mip or pmi is a tax deductible item just as interest on the loan

  3. Yes 20% down would be your perfect world but if you must do 15% down then I would ask the loan officer to give a print out showing the PMI rate on conventional compared to the FHA MIP rate. No up front PMI like FHA’s MIP. Monthly PMI rate should be lower than FHA’s with your great credit score and 15% down. Unless they’ve changed the rules since I got out of the business…You’re PMI drops off when you have the house paid down to 80% of value. FHA’s MIP falls off when you have it paid down to 78% of value. (And yes you would need an appraisal to prove this in 5 years.)

    **Upfront MIP can be rolled into your loan amount and doesn’t have to be paid out of pocket at time of closing.

    **But where in the world are you thinking of buying that would require $ 17,250 for your transaction? That’s at least $ 2,000 too much for closing and upfront MIP where I come from. Sellers are allowed to pay 6% of sales price (in closing costs and prepaids) for FHA and for conventional loans if you write your offer that way and they accept it. (Sellers can pay 6% on conventional if you are putting at least 10% down and if your contract is accepted specifying that the sellers contribution applies to your prepaid items as well as closing costs.) That should more than cover everything. We are in a buyer’s market. The seller should contribute to closing costs! I understand that some sellers right now are victims of falling house prices so maybe they don’t have enough equity to help pay many closing costs…but they need to agree to pay part of them if they want to get their home sold! Hope this helps!

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