Rates are flat today.   Initial jobless claims were higher than expected, driving stocks down.   Bonds are mostly flat.   Today’s comparison mortgage rates with no lender fees are 4.25% on a 30 year, 3.375% on a 15 year and 3.0% on a 5/1 ARM. Click here for more details.

School is back in session and I take the chance to dive into four different mortgage loan programs (Conventional, FHA, VA, and USDA) and show you what the details (payments, down payment, etc.) would be for one real life scenario.

This should help anyone who is confused on which program to pick.

I bust out my calculator in today’s episode:


(Watch it on your mobile phone or email reader here)

For those that watched the video, if you want to see the full list of top ten cities for single women click here.

Most of the questions I get from viewers are loan product related. To help answer some of these questions, I created a real life loan scenario and calculated the minimum down payment for four different loans: conventional, FHA, USDA, and VA.

Loan Scenario:

Home Price: $250,000 single family house

Property taxes & insurance: $4,500.

Credit score: 690.

Loan Type: 30 year fixed

Escrow: Yes (because you don’t have to pay 20% down on the home)

First Loan Option (Conventional Loan with 5% Down Payment):

Loan amount: $237,500

Interest rate: 4.5% (based on Loan to Value ratio or LTV and Credit Score)

Payment Breakdown:

  • Principle & Interest – $1,203
  • Taxes & Insurance – $375
  • Private Mortgage Insurance (PMI) – $186

Total Payment: $1,764

Second Loan Option (FHA Loan with 3.5% Down Payment):

Total loan amount: $243,662 ($241,250 + up front Mortgage Insurance Premium or MIP of $2,412)

Interest rate: 4%

Payment breakdown:

  • Principle & Interest – $1,164
  • Taxes & Insurance – $375
  • Private Mortgage Insurance (PMI) – $223

Total Payment: $1,762

As you can see, FHA loans and conventional loans are completely different in the way they are structured and priced. You may have noticed the difference in PMI costs, as well.

The payment in both loan options is almost identical, but the FHA loan has less money out of pocket for down payment.  Both types of loans have advantages based on your situation.

USDA and VA Options (0% Down Payment)

Here are the payments for the USDA and VA loans for this scenario.  These both require  no down payment if you or your house qualifies.

  • USDA total payment is $1,612
  • VA loan payment is $1,594

Obviously there are guideline restrictions for both of these loans (must be a veteran or live in a rural area), so you may not be eligible to use them.

Make sure the lender you are working with knows all of these loan types and can offer you options!

If you thought this was good information or worth discussing, help me bring transparency to mortgage lending by sharing today’s episode on Facebook or Twitter.

Let’s change the way people shop for a mortgage…forever!

– Mike

PS. To ask a question, get advice, or find out if you’re getting the best deal possible on your loan, just post a comment below. Daily comparison rates, calculators, and other cool features are available in the free Rates in Motion LoanApp by going to your smart phone and clicking on this link, activation code is 9203780002

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