I am working with some clients who are purchasing a house in Ballwin for 167,900. The seller is paying 3% of the sales price towards closing costs. The Mortgage Broker Greg sent them the following email trying to break down getting a conventional vs. FHA loan.

I think this can be a great example for other clients to break down the nuts and bolts of their loans.
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Hello,

Closing Costs will exceed the 3% ($5037) paid by sellers in either FHA or Conventional. Total closing costs/pre-paids will be around $5,900. Please see attached Good Faith Estimate. This is due to the amount of escrow reserves we are required to collect. You close in November, first payment January 1. Your escrow account will have to be paid in full plus the required 2 month cushion, this means the title company will collect 13 months of taxes, Jan – Nov plus two months. $166 x 13 months = $2158. You do have your earnest money of $1000 in the equation, so $5037 seller paid cc + $1000 should have you bringing little or nothing to close.

If FHA, you will have an additional 1.25% of the loan amt added to the transaction to pay for FHA’s Up Front Mortgage Insurance Premium. This is typically added to your loan amount. So FHA with 3% down payment would be structured as follows;

$167,900 Purchase Price
5,040 Down Payment

$162,860 Loan Amt (97%)
+2035 UFMIP @ 1.25%
=164,895 Total Ln Amt

If Conventional with 5% down payment there is no Up Front Mortgage Insurance Premium.

$167,900 Purchase Price
(8395) Down Payment
$159,505 Loan Amount

*Money has to be from your own funds, no gifts if conventional.

– closing costs for fha would be the same as conventional, because the ufmip is financed
– I don’t charge points, conventional or FHA
– Rates are neck and neck between Fha /conv, looking at 6.125 – 6.5%(worst case) either way by the time we lock, I suspect we’ll be on the low end or better, today would be 6.25.

If you have any questions feel free to call or email.

Thanks,

Gregory A. Gibson II
Mortgage Consultant

Equity One Mortgage

636-577-5092 ph
636-220-7877 fx