FHA Loans in Thousand Oaks

Quick Highlights of FHA loans

  • Lower interest rates for clients with lower credit scores
  • Lower mortgage insurance premiums for clients with lower credit scores.
  • Easier qualifying guidelines compared to conventional loans
  • Lower down payment requirements

If you are looking to purchase a home in Thousand Oaks and your credit scores are less than perfect or you can only put 3.5% down or if you have had a bankruptcy or foreclosure – an FHA loan may be right for you. And if you are looking for an FHA loan in Thousand Oaks, we are extremely confident you won’t find better rates with larger lender credits (yep, many lenders don’t offer these to their clients!) to apply toward closing costs than us.

When you put less than 20% down mortgage insurance is required in one form or another. If you have a 15% down payment and stellar credit – a conventional loan will definitely be your best option as the larger your down payment is and the better your credit is – the lower your mortgage insurance premium/cost will be.

However, with FHA, your credit score has no impact on the mortgage insurance premium you pay , which is a good thing if your credit score is lower and not such a good thing if your credit score is strong.

Understanding FHA Loans

Here is an example of what your mortgage insurance premium (MIP) would look like assuming a sales price of $750,000, 5% down, $712,500 loan amount, and a 640-659 credit score…

FHA monthly MIP = $497.50

We arrive at $497.50 by taking the base loan amount, multiplying by .80%, and dividing by 12 (months).

Now, let’s compare this to a conventional loan with the same criteria…

Conventional PMI (Private Mortgage Insurance) = $744.15

With your 640 credit score, an FHA loan will lower your monthly payment by $246 a month.

On top of having a lower monthly mortgage insurance payment, FHA will offer lower interest rates. Looking at that same example above ($750k sales price, 5% down and 640 credit score), here are the lowest rates with no points (points are a cost to buy a lower-than-market interest rate).

FHA interest rate with no points = 2.375% (as of 11/3/21)

$2,818 = FHA principal and interest payment based on 2.375% (UFMIP financed*)
$ 497 = FHA MIP
$ 100 = estimated monthly homeowner’s insurance
$ 781 = estimated monthly property taxes
$4,196 = Total payment for an FHA loan with a 640 credit score

With an FHA loan in Thousand Oaks at 2.375% interest rate, $1,383 goes toward principal each month and this increases slightly each month as you pay down your mortgage.

Conventional interest rate with no points = 3.375% (as of 11/3/21)

$3,150 = Conventional principal and interest payment based on 3.375%
$ 744 = Conventional PMI
$ 100 = estimated homeowner’s insurance
$ 781 = estimated monthly property taxes
$4,775 = Total payment for a conventional loan with a 640 credit score

With a conventional loan at 3.375% interest rate, $1,146 goes toward principal each month and this increases slightly each month.

By going with an FHA loan instead of a conventional loan in this scenario, you lower your monthly payment by $579 a month PLUS an additional $237 a month will go toward principal each month for a combined benefit of $816 a month by going with an FHA loan for your Thousand Oaks purchase instead of a conventional loan.

There are some negatives with an FHA loan. An FHA loan will require an upfront mortgage insurance premium (UFMIP). This will be 1.75% of your base loan amount or $12,468 assuming a $712,500 loan amount. This fee can be financed or added to your loan amount instead of being paid in cash. Also, with a conventional loan, mortgage insurance is canceled (removed) automatically once you have 22% equity based on your original sales price. With FHA, your mortgage insurance premium is required for the life of the loan if you put less than 10% down. It’s required for 11 years if you put more than 10% down.

Is an FHA Loan the Right Choice For You

There are lots of factors to determine whether or not an FHA loan will be the best loan for you in Thousand Oaks. The main factors are your credit history, your credit score and your down payment amount, but your job type, income type, employment history, down payment source and more can play a role in determining whether or not an FHA loan is a good fit for you.

A home purchase is the largest and most important transaction in most people’s lives. It’s important to make sure you get the right mortgage for you and your family and it’s best to consult with an experienced mortgage broker. We would argue Community First Mortgage is the best option for any homebuyer looking for an FHA loan in Thousand Oaks. Not only will you be working with a mortgage broker who will help guide you through the preapproval process and loan closing, but you will get the lowest possible rate with the largest lender credit to help cover your closing costs.

We hope you will start the preapproval process today by completing an application or if you are in contract to buy a home and/or want to see the rates we can offer please request a rate quote by clicking on the buttons at the top of the page.

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