Brian's Blog

head_left_image

Why FHA loans are the Affordable, Safe alternative to Fannie & Freddie Conforming loans

We strongly believe that FHA Loans are the safer, more affordable alternative to Fannie & Freddie loans.   Here is a quick comparison of the benefits and differences between the two.    

All comparisons are based on a purchase price of $250K, fico score of 675, and full documentation.   Rates are example only, presented for sample scenario comparison only. 
 
Fannie & Freddie require a minimum of 10% down in California (are capped at 90% LTV).    

FHA requires just 3% down (goes to 97%).   You can keep the 7% difference in the bank, which gives you liquidity, security, and peace of mind.  (the difference is $17,500)  The payment difference is minimal  (see below for detailed comparison).
 
Mortgage Insurance Qualification:    Fannie & Freddie utilize private mortgage insurance, which requires a second underwriting process from the Private Mortgage Insurance company the lender selects.   These companies have increased the thresholds for homeownership in recent months.   For instance,  They require atleast a 10% downpayment in California & have additonal underwriting criteria for homeowners or homebuyers in Declining states such as California.   **FHA requires just 3% downpayment nationwide, with no adjustments or additional criteria for Declining Markets. 
 
The monthly mortgage insurance rate on Private Mortgage Insurance is between .62% -.78%.   Monthly Insurance Premiums for FHA are just .55%.   Even more appealing is that the FHA premium is for a 3% downpayment, whereas the private Mortgage Insurance rates are for 10% down payment.     The Private Mortgage Insurance companies do allow a program called "Lender Paid MI" (MI = Mortgage Insurance).   With this program you are still capped at 90% in California, however the cost is not paid monthly, it is paid with a higher interest rate.  Typically .75% is added to your rate to cover the cost of the Lender Paid MI.  

FHA does have a second Mortgage Insurance cost, the Upfront Mortgage Insurance Premium (UFMIP).  This amount is 1.5% (soon to increase to 1.75%, which we will us in our example).   This lump sum fee can be paid either in cash at closing, or added to your loan amount.   Adding the UFMIP to your loan amount is the most common method.  However, if you are receiving a large seller credit towards your closing costs, these can be applied to your UFMIP. 
 
Fannie & Freddie require a 620 minimum score to put down less than 20%  (ie go over 80%).  FHA has no minimum.  However, most FHA Lenders do require a 550 mid fico score.    Fannie & Freddie have price premiums or increased rates for loans that are over 80%.  FHA does not increase the rate in this manner.   Here are the real numbers for the sample scenario above ($250K purchase price, 675 mid fico score, purchase loan, California home)

FHA Home Loan Fannie & Freddie Fannie & Freddie
  UPMIP & Monthly MI Monthly MI Lender Paid MI
Purchase price $250,000 $250,000 $250,000
Down Payment % 3.00% 10.00% 10.00%
Down Payment $ $7,500 $25,000 $25,000
   
Base Loan amount $242,500 $225,000 $225,000
UFMIP  (FHA only) $4,243 $0 $0
Total Loan Amount $246,743 $225,000 $225,000
   
Rate 5.500% 5.875% 6.375%
Principle & Interest payment $1,401 $1,330 $1,414
Taxes (1.25% rate) $260 $260 $260
Homeowners Insurance $52 $52 $52
Mortgage Insurance Factor (Monthly) 0.55% 0.62% 0
Mortgage Insurance (monthly) $113 $116 $0
Total Monthly Housing payment $1,826 $1,758 $1,726
   
All amounts are estimates, provided only to show the comparison between these  
loan programs.     
 
After 5 years, let's compare:  
monthly payment $1,713 $1,645 $1,726
Monthly payment Savings $0 $4,080 $6,000
Bank account ($17,500 @ 4% interest) $21,297 $0 $0
   
True savings after 5 years $21,297 $4,523 $6,630
   
Interest Paid - years 6-10 $59,582 $64,122 $70,236
extra interest paid vs FHA $0 $4,540 $10,654
   
bank acct after 10 years $33,428 $17,762 $14,774
       
True savings after 10 years $33,428 $13,222 $4,120
 
Assumes that you actually invested the monthly savings each month, made no withdrawals, 
interest rate was constant at a conservative 4%,   
continued to save the additional amounts below the $1826 after MI was stopped, etc  
       

All amounts are estimates only, provided only to show the comparison between these
loan programs on a given day for a sample scenario.   

The FHA Loan is the safest overall option, as it is safer to have a slightly higher Mortgage payment along with $17,500 in savings, than to put the extra money into your downpayment and save just a few dollars per month.    You will have the $17,500 earning interest, available for emergencies, and diversifying where your money is stored.   I think it is safe to say that storing money in your home is not the safest method of savings.

FHA also offers a couple of programs that Fannie & Freddie do not:    

FHA Jumbo Loans - Up to $728,750 with just 3% down payment.

FHA Secure - for homeowners who want to refinance their ARM or Adjustable Rate Mortgage into a safe, secure, fixed rate FHA Loan.   This program even allows Short Payoffs, or a Short Refinance.  This is where the current lender accepts less than owed, to help the homeowner get into a safe, new loan based on current values.  This program allows late payments on the mortgage.      

Hope for Homeowners - This is another FHA program that facilitates Short Refinances of your current loan.  This program allows some mortgage lates, and gives the banks clear criteria for how much they will receive when agreeing to enter into the Short Refinance into a Hope for Homeowners loan.   This loan does have an equity sharing agreement, where the homeowner must agree to share future appreciation in their home above the new lower loan amount with FHA in the event they Refinance or Sell their home in the next 10 years.   This is a fair trade for the life preserver this loan offers.    

The FHA 203K Streamline loan - This loan allows homeowners to Purchase or Refinance their property and include up to $35K of repair/upgrade work into the primary loan.  This avoids the higher interest rates of Equity loans.   You have one payment at a low fixed rate.   

When it is time to purchase or refinance your home, contact the FHA experts at VanDyk Mortgage.   866-900-2342  toll free or online at www.vandykfunding.com   We offer FHA loans (and Fannie / Freddie loans too) in many states including California, Washington, Florida, Georgia, and more.

VanDyk Mortgage is a Full Eagle DE FHA Direct Lender.

We proudly offer a full array of Government and Conventional loan Options including FHAVAUSDA,FHA JumboVA Jumbo, Conventional, Jumbo, VA Condo loans,   FHA 2-4 Unit LoansVA 2-4 Unit LoansFHA 203K Rehab Loans,  5% down Conventional loans 97% Conventional loans - 3% down,  Conventional Condo's OK to 95%,  95% conventional purchase with ZERO PMIand more.  

We serve the entire state of California  including: AntiochBrentwood Chula VistaCoronaFremontFresno,  Long BeachLos Angeles,  MurrietaOaklandOakley,  Oceanside, Pasadena, RiversideSacramentoSan DiegoSan FranciscoSan JoseSanta Ana, Santa Monica, Temecula, Ventura, Vista, and all other CA Cities and areas.

VA Loan LImits 2012     FHA Loan Limits 2012    Conforming Loan Limits 2012

Veterans:  We are able to help Veterans with a new home purchase as soon as 2 years afterBankruptcy, Foreclosure, or Short Sale (even sooner if Short Sale involved no late payments).  Call Today - get back in the market! 

Fast Forward Approval - the Smartest Way to get Pre-Approved

 

 

 

Government Loan Pros- VA FHA USDA FHA Jumbo VA Jumbo 203K

 

We proudly offer a full array of Government Conventional, and Jumbo loan Options including FHAVAUSDAFHA JumboVA Jumbo, VA Refinance, Conventional, JumboVA Condo loans,   FHA 2-4 Unit LoansVA 2-4 Unit Loans, FHA 203K Rehab Loans,  5% down Conventional loans Conventional Condo's OK to 95%,  95% conventional purchase with ZERO Monthly PMI, and more.  

 

Veterans:  We are able to help Veterans with a new home purchase with a VA Loan or VA Jumbo Loan as soon as 2 years after Bankruptcy, Foreclosure, or Short Sale (even sooner if Short Sale involved no late payments).  Call Today - get back into homeownership!  

 

--> VA Loan Limits for 2016.  Learn More - Up to $625,500 with zero money down VA Jumbo Loan 

 

--> VA Loans over the County VA Loan Limit - yes, we allow this:   Read more detail on how to get a VA Loan Over your County VA Loan Limit here  VA Loans up to $1.5M!

 

--> Answers to Common VA Loan Questions - VA FAQ Series

We serve the entire state of California  including: Anaheim,  Antioch,  Bakersfield, Brentwood, Burbank,  Carlsbad,   Chula VistaCorona,  Coronado, Downtown San Diego, EncinitasEscondido, Fallbrook,  Fremont,  FresnoHermosa Beach, Huntington BeachIrvineLong BeachLos Angeles, Marina Del Rey,   Menifee, Monterey, MurrietaOakland, Oakley,  Oceanside,  Ontario,  Pasadena ,  Poway,   Rancho Cucamonga,  Redlands,   Riverside,   Sacramento,        San BernardinoSan DiegoSan FranciscoSan JoseSan MarcosSan MateoSanta Ana,  Santa Clarita,   Santa MonicaTemecula, Torrance, Ventura, Vista, and all other CA Cities and areas.

 

We now serve the entire state of Virginia including Virginia Beach, Norfolk, Chesapeake, Richmond, Newport News, Alexandria, Hampton, Roanoke, Portsmouth, Suffolk, and all other Virginia Cities, Towns and Counties. 

 

We also serve the entire state of  Washington including:  Auburn, Bellevue, Bellingham, Bonney Lake, Bothell, Bremerton, Des Moines, Edmonds, Everett, Federal Way, Ferndale, Issaquah, Kent, Kirkland, Lacey, Lake Stevens, Lynnwood, Mercer Island,  Mill Creek, Monroe,  Montlake Terrace, Mt Vernon, Mukilteo, Olympia, Puyallup, Redmond, Renton, Seatac, Seattle, Silver Lake, Snohomish, Spokane, Sumner, Tacoma, Tumwater, Vancouver, Wenatchee, Woodinville, Yakima and all other WA cities and towns. 

 

We also serve Colorado, GeorgiaMassachusetts, Michigan, Mississippi,  Indiana, Tennessee, Texas, and Wyoming Homebuyers and Homeowners.  

 

VA Loan Limits 2016     FHA Loan Limits 2016     Conforming Loan Limits 2016

All information is subject to change without notice.

Licensing   Fair Lending    Privacy Policy    Complaints    

State of NY Disclosure    TX Disclosure    General Disclosure

 

Residentional Mortgage Lender registered by the VA Department of Business Oversight

Georgia Residential Mortgage Licensee #39449

VanDyk Mortgage is a private company specializing in FHA & VA financing,  VanDyk Mortgage Corp is not a government agency. Corp 2449 Camelot Ct SE, Grand Rapids, MI 49546 

 

Branch address  310 Via Vera Cruz, ste 210 & 211, San Marcos, CA  92078  760-752-4480 direct

NMLS ID:  3035 - VanDyk Mortgage Corp   NMLS ID  220268  

Brian Skaar - Loan Originator / Branch Manager   

 

NY Disclosure:  Website authorization has not been approved by teh New York State Department of Financial Services.   Until this website is authorized, no mortgage loan applications for properties located in New York will be accepted through this site. 

 

Fast Forward Approval - the Smartest Way to get Pre-Approved

 

 

 

 

 

 

 


 

 

Comment balloon 0 commentsBrian Skaar • October 07 2008 12:39PM
Why FHA loans are the Affordable, Safe alternative to Fannie &…
share
We strongly believe that FHA Loans are the safer, more affordable alternative to Fannie & Freddie loans. Here is a quick comparison of the benefits and differences between the two. All comparisons are based on a purchase price of.. more
FHA Hope for Homeowners Blog
share
We have just added a new blog to discuss the new Hope for Homeowners program from FHA. Here is the link: http://fhahopeforhomeowners. blogspot. com/ Check back for updates, as the program becomes available to homeowners soon. … more