FHA vs Conventional

kotenaMay 18, 2009

We found a house at $328K in as-is-condition. The house requires about $30K investment with all labor free(my husband's). The appraisal came in very tight at $328K (I do not get how they figured this out). Since we are financing with less than 20% down, there needs to be insurance on the house. our lender called today saying that he could not find mortgage insurance on this house because none of the insurers liked the property - sigarette smell, old house, requires work. I.e. our only choice now is FHA, and not because of us (our credit scores are excellent and debt/equity ratio is ok), but because of the house. I have few questions on FHA

1 - FHA will requrie some insurance premium to be added to the mortgage (about $6-7K) - can I ask for reduction of the sales price now since it is pretty much like the appraisal came low?

2 - Can I refinance FHA into conventional?

3 - Will FHA PMI ever disappear?

we are torn now - want this house, but do not want to increase our debt and have higher than expected monthly payments.

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linda117117

our lender called today saying that he could not find mortgage insurance on this house because none of the insurers liked the property - sigarette smell, old house, requires work. I.e

1st off, find another lender, he's lying to you. How many "insurance companies" went to the house and smelled the cigarettes. How ridiculous!

2nd, FHA could be a nice mortgage for a first time home buyer. You have to come up with very little money and if the house is in good condition, you have nothing to worry about.

Talk to a few lenders.

    Bookmark   May 18, 2009 at 8:57PM
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brickeyee

Needed repairs can trow a wrench into FHA financing.

FHA has their own inspection rules.

The insurance premium for FHA may be partially refunded if you refinance and pay off the FHA loan, but it is paid up front and never canceled.

    Bookmark   May 19, 2009 at 9:39AM
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quasifish

The monthly FHA PMI (MIP) has to be paid for a minimum of 5 years. It is based on the original loan amount and cannot be removed with an appraisal. You must pay off 22% of the original loan amount before it can be removed.

HTH a little with one of your questions.

    Bookmark   May 21, 2009 at 9:56AM
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pamghatten

I agree with some of the other posters ... call your lender and ask for the specific reasons why the MI companies will not insure the property. I can tell you that the MI companies currently have LOTS of restrictions, but not of the type you listed.

What makes up the $30K worth of repairs? Updating and cosmetic? Or real physical issues - heat, wiring, structural. FHA will require any safety and soundness problems to be fixed prior to closing.

Yes, you can refi an FHA into a conventional.

And no, I don't think you can go back and ask for a reduction is sales price, the house did actually appraise for the sales price.

    Bookmark   May 21, 2009 at 12:37PM
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