AP NEWS

Just Approved Terry Hastings Buyers with high credit score get home with mortgage insurance

April 15, 2019

Mortgage banker: Terry

Hastings.

Home value: $410,000

Loan amount: $365,000

Loan terms: 4 percent 30-year fixed

Backstory: Hastings received a call from a couple who were referred by their Realtor. They were shopping around for a home, but they did not have 20 percent to put down. A friend had mentioned a Federal Housing Administration loan as their option, but would this help them?

Hastings collected their income information and ran their credit report. Their credit was very high and their salary was strong too. Hastings asked questions about how long they intended to stay in their home and explained closing costs to them as well.

Many borrowers think you need to be a first-time home buyer for conventional programs or else have 20 percent down to buy a home. Hastings explained this was not the case and was a common misconception.

Because of their income and credit score, the borrowers could put down less than 20 percent, and unlike FHA, there were no required points to pay.

Conventional loans with less than 20 percent down do require private mortgage insurance. Mortgage insurance is a policy paid by the borrowers, which protects the bank in case of default.

Hastings explained that they could get a higher rate and thus the bank would pay the premium or they could pay the insurance premium and get a lower rate.

Mortgage insurance on a conventional loan can be paid off over time as opposed to the FHA mortgage insurance, which would stay with them for life.

Hastings explained the new twist of mortgage insurance that worked in their favor. Private mortgage insurance premiums used to be primarily based upon the percentage of money you put down.

However a recent change graded the premiums on the percent down, but also used the credit score to judge the risk. Because the borrowers had a FICO credit score of more than 750, the premium was less than $100 per month and would be collected as part of the mortgage payment. It would disappear once they paid down the loan to 78 percent or showed that the house increased in value.

The borrowers were excited by the savings proposal over FHA and found a house. Their conventional loan was approved a week later.

Terry Hastings,

Total Mortgage Services,

203-470-5434,

TerryHastings.com