LOAN OFFICER QUOTES RIDICULOUS FHA RATE
We hosted a large first-time homebuyer seminar recently and one of the attendees had just been pre-approved by another lender for FHA financing.
The loan officer convinced her that she was only marginally qualified, that FHA loans are harder and that FHA rates are higher.
He quoted her a rate of 4.25% for a $700,000 loan. I about fell over when she told me that b/c the commission or rebate for a $700,000 FHA loan at 4.25% is almost 4% or $28,000!
The borrower had limited funds for a down payment but was actually quite strong, so JVM’s rate would be in the low 3% range!
There are numerous lenders and loan officers who focus only on FHA and VA loans b/c they are so skilled at convincing unsuspecting borrowers that FHA and VA rates are “higher.”
FHA and VA rates are LOWER, and if there is one take-away from this blog it should be this: Beware of lenders who prey on FHA and VA borrowers!
“GOVIES” AND WHY WE LOVE THEM
FHA and VA loans are referred to as “govies” in the mortgage industry b/c they are backed by the U.S. government.
FHA loans are great b/c we can close them so quickly (14 days), they can be closed “as is,” the rates are very low, they are very flexible from both a credit and debt ratio perspective, and they only require a 3.5% down payment (that can be 100% gift funds).
VA loans are even better b/c the rates are so low, there is usually no down payment requirement, and there is NO Mortgage Insurance.
FHA DRAWBACKS
- Up-Front Mortgage Insurance: Every FHA mortgage requires an Up-Front Mortgage Insurance Premium equal to 1.75% of the loan amount.
- Permanent Mortgage Insurance: Every FHA loan has permanent monthly mortgage insurance equal to 0.80 (if LTV is 95% or less) or 0.85%.
VA DRAWBACKS
- VA Funding Fee: Most VA Loans have an up front funding fee of 2.25% (but it can vary depending on number of uses and vet status).
- Clear Section I Termite/WDI report: All VA financed properties must have a clear report.
VA and FHA REFI’S
VA and FHA loans cannot be refinanced into new VA or FHA loans until the loans have seasoned for 210 days. But, once they do, they are both eligible for “streamlined” refi’s with no appraisal required as long as the original loan amount is not exceeded.
Cash out refi’s, with an appraisal, are available up to 85% LTV for FHA and up to 100% LTV for VA.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167
