3.25% FHA Rate With 10% Down?

Question

I keep getting feedback that it is currently impossible to get a hold of this kind of loan. I have loan disclosures, mortgage commitment all showing a 3.25% fixed FHA rate with PMI coming off during the 11th year because of the 10% down payment. If i have loan disclosures, and a mortgage commitment showing these numbers, what can possibly go wrong for me? Am I being lied to?

Chris Mason · Answer

If it's a DTI issue and you feel confident that your LO is calculating it correctly, FHA may be the only option on the table. In which case FHA is great financing because your basis of comparison in this scenario is to portfolio or hard money, and not fannie/freddie.

EDWARD M. · Answer

@Chris Mason My credit is good, the only reason I am doing it is because of my DTI ratios. What would you recommend?

Chris Mason · Answer

It's fairly rare that it actually makes sense to do FHA for someone w/ 10% down and good credit (there is more to it than just the note rate...), but yes FHA mortgage insurance does come off after a decade if you do FHA 90% LTV.

FHA mortgage insurance is still not PMI (even LOs make this error/typo, don't feel bad), however, so dropping it before that 11th year would require a refinance to future/current prevailing market rates (which may have returned to historical norms in the 6.5%-7.5% range), no matter where an appraisal comes in during year 5 or 8.