Page 12 - March 2023 Issue

DOLLARS AND SENSE by Tolbert Rowe

How Will You Finance Your Purchase?

The spring buying season is just around Property conditions could be an issue higher your credit score the lower the

the corner and although we don’t know with a government insured loan premium. The closer the down payment
what kind of season it will be because (USDA,FHA,VA) to the extent that the is to the 20% threshold, the lower the
homes available for sale are at record house must comply with HUD minimum premium. Putting 10% down instead
lows, you need to know exactly how you property standards. It is important to of 5% will lower the monthly premium.

will finance the purchase, assuming you work with a realtor experienced with There also is an option to pay for it all

are not paying cash. Especially if you are HUD guidelines who can alert you to at settlement, which sellers will do as

a first time buyer. prospective problems. Conventional an incentive to purchase their home,
property requirements are not as rigid. especially builders.
Loan guidelines and requirements can
vary with each loan program. Low credit If you do not have 20% for a down A benefit of conventional monthly
scores may impact the rate that you pay payment you will be required to pay mortgage insurance is that it is cancelled
with one program but not necessarily mortgage insurance, which is basically when the loan balance gets to 78% of the
with another program. Down payment “default” insurance. It is triggered if a original purchase price of the property.
requirements vary and work and credit borrower defaults on their loan and Let’s say you purchased a home for

history, cash reserves after closing and the lender forecloses and the property $100,000 and put 10% down borrowing
payment shock (proposed new mortgage is sold on the courthouse steps for less $90,000. Going forward when the
payment VS current housing expense) than the amount owed. As an example, loan balance got to $78,000 (78%)
could be a factor in qualifying for a someone owes $100,000 on their the monthly premium for mortgage

specific loan program. mortgage at the time of default and insurance would expire.
the house is sold at foreclosure sale for
The USDA Guarantee Program does not USDA loans require the upfront

$80,000 creating a $20,000 loss for the
require a down payment allowing you to payment of 1% of the purchase price that

lender. The mortgage insurer will pay
borrow 100% of the purchase price, but is added to the loan and annual renewal
the lender the $20,00 that they lost.
your household income cannot exceed premium of .35% that is divided by 12
$121,350 for families of up to four people Mortgage insurance can be paid several and added to your monthly payment.

and $160,400 for families of five or more. ways depending on the loan program, as
FHA loans require an upfront payment
This is the only residential mortgage an up front expense at settlement or as
of 1.75% that is also added to the loan
program with income limits, with the part of the monthly mortgage payment,
and a renewal premium of .85%. Th ey
exception of the USDA subsidized or in the case of FHA and USDA, it is
also require a down payment of 3.5% .
program for low income households. paid both ways.
In both USDA and FHA loans there is

The VA guaranteed program does not Mortgage insurance for conventional
no automatic cancelling of mortgage
require a down payment either but you loans is usually paid as part of the
insurance when the loan amount hits a
must be a qualified veteran and have a borrower’s monthly payment and the

certain threshold. It is paid for the life
certificate of eligibility, easy for a lender premium is based on credit scores and

of the loan.
to get if you do not have it. the amount of down payment. The
VA loans require the payment of a 2.30%
funding fee that is also added to the loan
amount. There is no monthly mortgage

“Your Mortgage Consultant Since 1985”
insurance paid, only the upfront funding
Purchase or Refinance fee.
The USDA program is the program
of choice if income is below the limits
and the borrower has at least one credit
tradeline with a 12 month payment
115 E Dover St. Ste 3 - Easton, MD history. Only one borrower has to meet
the 12 month history if there are two
tolbert@baycapitalmortgage.com C. Tolbert Rowe, borrowers. The mortgage insurance
www.baycapitalmortgage.com NMLS Vice President/Lending
182844 premiums are signifi cantly less.
410-819-3005 / cell 410-310-3520
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