Conventional Mortgage Insurance vs. FHA Mortgage Insurance

Transcript

Hello, all my mortgage fanatics out there. Today we’re gonna talk about the 1% down conventional financing and the 3% down conventional financing versus fha. My other videos we talked about the groundbreaking Fannie Mae 1% Down does have some income limitations. That can be restrictive. In some areas it’s 50% of the ami, which is the adjusted mean income of that area.

You have to look that up in the Fannie Mae lookup tool, and it depends on the property zip code of where you’re buying now, where you live, both the property zip code and the area, the GL code of what, where you’re buying will be the qualifying down payment. That being said, let’s review f h a. And conventional f h a was, it is a good product for people that have bruised credit.

So if you’ve got six 40 credit score, six 20 fco score six 60, and when you wanna do a minimal down payment, it’s probably a pretty good product. You get the higher credit scores conventional beats in every aspect. One is there’s a 1.75%. Upfront Mortgage insurance premium. So what does that translate into?

That comes out to a upfront mortgage insurance. On 500,000, you’re looking at $8,750 that you have to pay the FHA to get that loan. That’s just a fee that you pay that goes on top of your loan and it’s finance, but you gotta pay that back so it’s finance, so you pay back two times. So that’s just the fee that’s gone.

You don’t have that with conventional 1.75% up front. The second thing is they 0.55% monthly mortgage insurance. Now with conventional mortgage insurance, like for example, a 500,000 loan, you’re looking at a seven 80 FICO score. You’re looking at $63 a month, 5% down with three and a half percent down, you’re looking at $239 a month.

And that stays on for life of a loan. The conventional lo, the conventional mortgage insurance can drop off when you hit 80% loan to value. So the property goes up and you pay your mortgage down, and you pay the mortgage for 24 months, and it has been on time. They will remove that mortgage insurance, that fha, it’s on there for life.

I mean, there’s nothing you can do about it. You’re gonna be paying that FHA more insurance. And now if you look at 239, pay $239. Times 360, that’s $86,000 in mortgage insurance. That’s on top of the $8,750 you’d pay up upfront. So think about that. A lot of people get pushed towards F h A one of the reasons is they change their pricing.

F h a should be about three quarters of a point lower than conventional. If the margins are the same, most people move the margins up, just like va. Talk about that miler loans. That American finance system, if there’s a more profitable product, they’ll actually gouge you on the profit. They’ll make three, two, and three times more and give you a higher rate than you deserve.

Just cause it looks better. It’s, it should be about three quarters of point lower. So if the conventional 6% F H a should be five and a quarter, I mean it can move a little bit. That’s a good rule of thumb. That’s that different That’s where my pricing is. I make the same most lenders and what I mean most, 99% will make more profit on fha.

They also make more profit on va. That’s not something we believe in. We don’t believe in taking somebody’s service from their, from their with a, as a veteran and stealing that low rate in putting that money in their pocket. At the same time, fha, these people pay a huge amount of mortgage insurance, upfront mortgage insurance, 1.75% up front.

On 500,000, that’s $88,750. Then they paid over $239 per per month in mortgage insurance. That insurance is what lowers the rate, cuz it’s a lower risk to the person holding the mortgage cuz if you default, those insurances pay because of that, the rate should be lower. They don’t do that. They move the rate up and they make more money and they make you pay that over over time and it could be hundreds of thousands of dollars.

So I can go through the numbers with you. As they say, the numbers don’t lie. It’s right there. And people can say, oh, that’s not true. Well, let’s look at the numbers cuz I can break it down and I can show you 100%. Those numbers are true. I’ve been through this. The only reason most people don’t talk about it is they’re making more money.

I’m not. So there’s the difference in our how, on our pricing structure it has to, the pricing structure is set by the owner. I’m the owner here. I set the pricing. I make it the same across the board, so I’m not doing anything better on a, on a absolute level, but on a comparative level, I’m way better than these, these other lenders they make it easy for me.

Their greed is, is a and I kind of enjoy exposing their greed. If you’re gonna gouge somebody who paid Morgan insurance for fha, hey, maybe, maybe we should look at the numbers and see what you did. If you’re gonna gouge somebody who had insurance placed and paid for by the Veterans Association on the VA loan, and they deserve a lower rate and you tripled your profit, maybe we should talk about this.

Maybe we should show the veterans this. So gimme a call. We can open up a conversation. If you have more questions, leave some comments below. Be happy to answer anything you, you have, and we’ll talk to you soon. Thanks.