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If I'm going to do an FHA loan with more than 20 per cent down,

what type of insurance is required for this?  Do I pay upfront or mip?  And if so, why is this necessary with at least the 20 per cent down payment?  It is also new construction.  And my ficos are higher than the 640 range.  The home is under construction now with the second story going up.  I just want to make sure I'm not paying for items/insurance that I don't need or want to pay for since the settlement charges in FL are very high.
TIA
  • July 12 2011 - US
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Answers (10)

You could call HUD; let them know you are being forced into a loan you don't want. They may take an interest in that.
  • July 13 2011
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Profile picture for warren w1
Thanks for all of your help!  It is definitely linked to the builder.  I won't mention the name but it begins with an R and the bank is BOA.  It kind of feels like they just pushed me from one person to the next and doing what they feel?  Don't get me wrong.  I know I made the right decision in building new right now but feel that they're making money hand over fist with this transaction!  And I'm the one paying the mortgage payments and settlement costs!  They did give me a good deal.  But I sure don't want to pay for it in the end!
Do I have another choice if I have a commitment letter now?
  • July 12 2011
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Warren,  I have to wonder if your lender is affiliated with the builder of the home.  That is almost always a conflict of interest and one has to question if you are being given adequate and proper advice and counseling.  I agree with others that paying for upfront and/or monthly mortgage insurance should be avoided if you are putting 20% down (if at all possible).  There is plenty time to switch loan products and/or lenders to ensure you get the best transaction to meet your goals.  
  • July 12 2011
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There are some big underwriting differences between FHA and conventional.  For example the time needed after a BK or short sale or foreclosure is less,  Also if your credit score are lower than 680 you may be able to get better pricing and payments with FHA v. conventional.  It is good to ask if you can get a conventional loan, but in the end the best loan is the one you qualify for with the lowest payments.

  • July 12 2011
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Conventional financing, in general has more strict guidelines in qualifying.  There may be a reason your loan officer set you up on an FHA loan.  However, all things being equal if you can qualify for a conventional mortgage, you should come out ahead.

If your lender locked you in when rates were better, that certainly will affect your payment because switching today will mean you have to lock at today's interest rates.

However, I doubt an increase in rate will be more expensive than paying monthly MI for 5 years plus the cost of up front mortgage insurance.

I would definitely ask your lender why they went FHA instead of conventional and ask questions until you're satisfied.  Ask your lender to explain the advantages of one type of loan over another.  They should be equipped to answer those questions for you.
  • July 12 2011
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I would suggest you change the loan to conventional.  There is no real advantage to an FHA loan, plus the MIP is an unnecessary expense.  The good news is you have plenty of time to switch loan types.  Best of luck.
  • July 12 2011
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YES......  Ask why?????..  There is no need for you to pay more money toward your monthly payment.  They have time to switch the loan around. 

  • July 12 2011
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I don't know why?  It was set up as FHA in the beginning but I'm seeing a lot more added expenses with it.  
Is is something I should bring up before it gets too late?
I have a commitment letter and they're saying the home should be complete by the beginning of Oct.
  • July 12 2011
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MIP will no longer be Tax deductable after 2012.
20% down.  You will be much better off with a conventional loan.

  • July 12 2011
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FHA requires upfront and monthly mortgage insurance for 60 months regardless of the loan amount to property value for loan terms greater than 15 years.  So, why are you not inquiring about conventional financing?  The middle credit score minimum is 620.  The rate might be slightly higher based on your credit scores, but you will not need mortgage insurance.

  • July 12 2011
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