To paraphrase MC Hammer: Fannie Mae Can’t Touch That – not even close.
FHA has been the redheaded stepchild of the mortgage world pretty much forever.
This is because of misconceptions about FHA and because Fannie Mae’s conforming loan programs used to be much better for most strong borrowers – but not anymore.
FHA misconceptions include: (1) you need a clear pest report (you don’t); (2) FHA rates are higher (they’re much lower); (3) FHA loans take longer to close (not at all); and (4) FHA borrowers are weaker (not anymore).
This is what happened: Fannie Mae recently increased rates for many strong borrowers while FHA recently lowered its monthly mortgage insurance premiums (MIP) by 0.30%.
As a result, we are finding that many of our borrowers who are putting down 10% or less can now get much lower interest rates and payments with FHA financing.
This is particularly the case for buyers who do not qualify for Fannie Mae’s new first-time homebuyer fee waivers or rate-increase waivers.
This is happening so much in fact that I felt compelled to blog about it again, despite the fact that I have addressed it briefly in several previous blogs.
A huge advantage of FHA is that the terms do not change if buyers put less down too – with the exception of MIP (it is 5 bps higher when the LTV is above 90%).
So – buyers putting 10% down for Fannie Mae financing can put down 3.5% for FHA and still get better terms – while also hanging on to cash for home improvements or additional savings after they close.
TLDR: Many borrowers who were focusing on Fannie Mae financing should now consider FHA financing because it may now be a far better option!
Here are some of the blogs I have written that explain all of these issues – in case any readers would like more info:
FHA Just Got More Amazing (Cuts MIP by 30 BPS)
Fannie Mae Is Raising Rates for Strong Borrowers
Fannie Mae’s Greatest Hits (explains how/why Fannie Mae increases rates for some borrowers) rates
In Defense of FHA – Misconceptions Persist
Fannie Mae Made Rates Way Lower For First-Time Buyers
Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
