Comparing FHA and Conventional Financing for buying a $300,000 Seattle Home
I’m working with a homebuyer who is looking to buy a home in Seattle priced around $300,000 with minimum down payment. Rates are based as of October 15, 2012 5:00 pm with excellent credit (scores of 740 or higher) using a 30 year fixed rate. For your personal rate quote based on current pricing for a home located in Washington, click here.
We’re also using rebate pricing to pay for closing cost to keep the amount of funds needed for closing at a minimum. Quotes below are for a single family detached (non-condo) dwelling. Rates based on closing just in time for Thanksgiving on 11/21/2012 (less than 40 days away – can you believe it).
Conventional 30 Year Fixed with 5% down payment:
3.500% (apr 3.967) provides a PIMI (principal, interest plus mortgage insurance) payment of $1,424.16. Net closing cost (not including prepaids and reserves) are $290. NOTE: for prepaids and reserves, factor having 14 months of home owners insurance and around six months taxes collected (depending on when your first month’s payment is due).
3.250% (apr 3.704) has a PIMI payment of $1,394.72 (taxes and home owners insurance are additional). Closing cost are estimated at $3140 (not including prepaids/reserves).
NOTE: with conventional financing at 5% down, the seller can contribute up to 3% of the bona fide closing costs, prepaids and reserves. Buyer must meet the down payment requirements of 5% ($15,000 for this scenario).
Fannie Mae Homepath with 5% down payment (you can put down as little as 3% with this program, which will impact the mortgage rate). Fannie Mae Homepath is only for specific properties (Fannie Mae foreclosures) and does not require an appraisal nor mortgage insurance. Click here to learn more about Fannie Mae Homepath for homes located in Washington.
3.875% (apr 3.963) with PITI (no mortgage insurance!) of $1,340.18 with net closing cost of $3400, not including prepaids and reserves. Seller can pay all prepaids and reserves if negotiated into the contract.
FHA 30 Year Fixed with 5% down payment (NOTE: FHA has both upfront and monthly mortgage insurance).
3.00% (apr 3.831) with PIMI of $1504.89 and net closing cost of $2134 excluding prepaids and reserves. Minimum down payment of $15,000 required – the seller can pay the closing costs, prepaids and reserves up to 6% if negotiated in the purchase and sales agreement.
FHA 30 year Fixed with 3.5% down payment: the only difference in pricing is slight with the monthly mortgage insurance.
3.00% (apr 3.890) with PIMI of $1538.59 and net closing cost of $2120 not including prepaids and reserves. Minimum borrower investment is 3.5% down of $10,500. The seller can pay prepaids and reserves if negotiated in the purchase and sales agreement up to 6% of the sales price.
If the borrower served the military, they might qualify for a VA loan which would allow for zero down in this scenario. And a home not in Seattle, in a rural location with borrowers who meet the income limitations, may qualify for a zero down USDA loan.
If you have questions or are interested in getting preapproved for a mortgage for a home located anywhere in Washington, please contact me.