Conventional 97% ITV Program Or FHA – Which Is Better? SLIDESHARE.BLOWNMORTGAGE.COM LENDER HOTLINE: 888-581-5008 In the past, if you wanted to put down less than 5% on a home, you had to opt for the FHA loan, which allowed for as little as 3% down. Today, however, there is another alterative – the Conventional 97% program. This program allows for you to put down 3% yet still have the benefits of a conventional loan. This program started at the end of 2014 and is still going strong, giving those with small down payments the opportunity to still get into the home they want without paying the FHA fees. The FHA Costs FHA is a good alternative for first-time homebuyers and it has provided many people with the opportunity to purchase a home that would otherwise have been unable to, but the fees can be hefty, especially since they are for the life of the loan. The first fee is the upfront mortgage insurance fee. This is a fee of 1.75% of the total loan amount. For example, if you are taking out a $200,000 loan, you will have a fee of $3,500 that will be due upfront. In some cases, the amount can be rolled into your loan, but that is still an extra $3,500 that you must pay at some point during the life of the loan. In addition to the upfront mortgage insurance is the annual insurance premium that you will pay. This premium is divided equally among your 12 payments per year and is 0.85% of the loan amount. On a $200,000 that equals $1700 per year or $141 per month. If you add that amount up over the life of the loan, you come up with a lot of extra money that is thrown towards fees, not giving you any equity in your home. The Conventional Loan Costs The 97% LTV program will offer a variety of choices for you. Your fees will basically depend on the lender that you choose. If your credit is good, you may not have to pay any type of origination fee or discount points. There is no upfront mortgage insurance fee, but there is private mortgage insurance that you will pay on a monthly basis. The amount varies depending on your credit score, loan amount, and the amount of your down payment. They can vary between 0.3 and 1.5 percent of the loan. The difference with this private mortgage insurance, however, is the ability to cancel it once you hit below an 80% LTV. You can request this cancellation ahead of time in writing as long as your payments are current or you can wait until it automatically cancels, which occurs at 78% LTV. The FHA mortgage insurance never cancels – it is yours to pay for the life of the loan. How do you decide which loan is right for you? The answer depends on your exact situation. If you have less than perfect credit, you may be better off with an FHA loan because they have more flexible guidelines, even after the mortgage crisis. If you have perfect credit and a decent debt-to-income ratio, that falls around 28 percent for your mortgage

1. CONVENTIONAL 97% LTV PROGRAM
OR FHA – WHICH IS BETTER?
BLOWNMORTGAGE.COM

2. In the past, if you wanted to put down less than 5% on a
home, you had to opt for the FHA loan, which allowed
for as little as 3% down. Today, however, there is another
alterative – the Conventional 97% program. This
program allows for you to put down 3% yet still have the
benefits of a conventional loan. This program started at
the end of 2014 and is still going strong, giving those
with small down payments the opportunity to still get
into the home they want without paying the FHA fees.

3. The FHA Costs
FHA is a good alternative for first-time homebuyers and it has
provided many people with the opportunity to purchase a home
that would otherwise have been unable to, but the fees can be
hefty, especially since they are for the life of the loan. The first
fee is the upfront mortgage insurance fee. This is a fee of
1.75% of the total loan amount. For example, if you are taking
out a $200,000 loan, you will have a fee of $3,500 that will be
due upfront. In some cases, the amount can be rolled into your
loan, but that is still an extra $3,500 that you must pay at some
point during the life of the loan.

4. The FHA Costs Continued
In addition to the upfront mortgage insurance is the
annual insurance premium that you will pay. This
premium is divided equally among your 12 payments per
year and is 0.85% of the loan amount. On a $200,000
that equals $1700 per year or $141 per month. If you add
that amount up over the life of the loan, you come up with
a lot of extra money that is thrown towards fees, not
giving you any equity in your home.

5. The Conventional Loan Costs
The 97% LTV program will offer a variety of choices for you.
Your fees will basically depend on the lender that you choose. If
your credit is good, you may not have to pay any type of
origination fee or discount points. There is no upfront mortgage
insurance fee, but there is private mortgage insurance that you
will pay on a monthly basis. The amount varies depending on
your credit score, loan amount, and the amount of your down
payment. They can vary between 0.3 and 1.5 percent of the
loan.

6. Loan Costs Continued
The difference with this private mortgage insurance,
however, is the ability to cancel it once you hit below an
80% LTV. You can request this cancellation ahead of
time in writing as long as your payments are current or
you can wait until it automatically cancels, which occurs
at 78% LTV. The FHA mortgage insurance never cancels
– it is yours to pay for the life of the loan.

7. How do you decide which loan is right for you?
The answer depends on your exact situation. If
you have less than perfect credit, you may be
better off with an FHA loan because they have
more flexible guidelines, even after the mortgage
crisis. If you have perfect credit and a decent
debt-to-income ratio, that falls around 28 percent
for your mortgage payments and 36 percent for
your total debt per month, then a conventional
loan will typically be the cheaper option for you.

8. If your debt ratios are high or anything else in
your loan profile is a little different than the
norm, the conventional loan might not be an
option for you as lenders are very picky about
the risks that they take today. If you do end up
with the conventional loan, your rate will likely
be significantly higher. The key is figuring out
what you will get approved for and then do the
calculations from there to see how well you will
fare.

9. CLICK HERE
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OR CALL: 888-581-5008

10. INFORMATION PROVIDED BY:
Justin McHood
Mortgage Commentator
Information Originally Published: 9/7/15
Justin McHood is Americas Mortgage Commentator and has
been providing Mortgage commentary for over 10 years.

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