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FHA vs Conventional Refinance


Hi Folks,
We bought our current home 4 1/2 years ago and are considering 30 year refinancing options.  We closed the home before the May 31st 2009 FHA cutoff.
The #s are as follows:
Home purchase price: 204K
Current value: Houses exactly like ours are selling for around 220K
Still owe: 176K
Current APR: 4.75%
Excellent Credit: 820+
Salary: 75K/yr, have been at the same job for 6 years
We are leaning toward conventional, reason being that we would like to ideally re-appraise the home so as to avoid PMI ( Given the current purchase price we are pretty close to the 80% LTV threshold)
Although since we closed before the FHA cutoff date I understand there are PMI discounts.  How does this work exactly?  We don't want to get stuck with even a reduced PMI for 5 years.
What are the typical closing costs associated with FHA vs conventional loan?  I have a quote for around 7K in closing costs (including broker's fees, closing ) for an FHA refinance, is that way too high?  
Any help would be greatly appreciated!
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November 13 2012 - Miami
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Answers (3)

You may qualify for FHA Streamline without an appraisal.  The advantage is a no cost loan, lower interest, and of course no appraisal.  You will need to fund the escrow account but you will receive a check from the old escrow account.  The new loan amount must equal the balance of the old loan plus new upfront mortgage insurance.  You will receive a partial credit for upfront mortgage insurance paid for the first loan.  The biggest advantages here are no closing costs except for escrow and no appraisal.

A conventional loan will most likely have closing costs added to the loan amount and will require an appraisal.  You may or may not need mortgage insurance depending on the appraised value. The biggest advantage here is you may not have mortgage insurance depending on the appraised value and if you did have mortgage insurance, it most likely will be for less than five years.

Contact me through my profile and we can provide you a detailed analysis comparing side by side a FHA and conventional for your situation.
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November 19 2012
If the equity is there and your credit is what you say it is then a conventional loan is the way to go.  Even if you are just shy of the 80% threshold, there are ways to structure it so that you do not have a monthly mortgage insurance payment.  As for the closing costs, I think in Florida your taxes are due soon so part of that may be the setting up of escrows.  Keep in mind with any refinance you are getting a refund from your old escrow after you close and you are not making a mortgage payment the first of the month after you close.  If you would like a second opinion, contact me through my profile and I can put you in touch with some in my group who can help.
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November 14 2012
Yes 7k is way to high, especially considering you are eligible for the discounted UFMIP your costs should be close to zero with an appropriate lender credit applied. The rate on FHA should run about .25 to .375 less than conventional (for the same amount of credit toward cost). With the discounted MI rate I think the payment would pencil in very close to conventional (assuming you appraise high enough) and after 5 years your payment will be lower over the remaining term of the loan.
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November 14 2012
 
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