We quote and recommend “One Point” loans in lieu of “No Points” loans for several reasons. First of all, Lenders now offer much larger interest rate buy-downs for a “Point” (1% of the loan amount) than they did in the past. Typically, a Point can buy a rate down as much as ½ per cent. So the cost of the Point will be made up with reduced interest in as little as two years. Also, we think it is unlikely that rates will ever be this low again. So we encourage our borrowers to get the lowest rate possible now while they can.
The advantages of FHA include: 1) The buyer only needs a 3.5% down payment; 2) The ENTIRE down payment and all of the necessary reserves can be a “gift” – the borrower does not need any seasoned reserves to qualify. 3) Credit Scores can be as low as 600; 4) FHA financing can now be done “AS IS”, without a clear termite; and 5) FHA Loan Amounts go as high as $729,750 for Single Family Residence, and much higher for Units. Because of FHA, it is possible to buy a house for $750,000 with only 3.5% down.
Rates are about 3/8 of per cent lower for an FHA Loan below $417,000. FHA Rates remain extremely low in any case, as indicated by our quotes yesterday. “Low Balance” FHA Rates are in the high 4’s, and “High Balance” FHA Rates are in the low 5’s for a one point loan.
We do not recommend FHA financing if a client has very good credit (scores above 720) and adequate seasoned funds (over 5% of the purchase price for a loan under $417,000, and over 10% of the purchase price for a loan over $417,000).
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167