If you have a low credit score, and by low I mean anything below 660 FICO score, you may be best served with an FHA loan. That is because Fannie Mae and Freddie Mac start charging pricing adjustments for a credit score below 740. You can get prime Fannie Mae rates on a FHA loan with credit scores as low as a 580.
With an FHA mortgage you are also able to cash out up to 85% of the value of your home. With a conventional loan (Fannie Mae or Freddie Mac) you can only go up to 80% loan to value when taking cash out. If you are located in a soft market the 80% will be dropped to 75% because property values are decreasing in your area.
With an FHA 30 yr fixed mortgage you will have private mortgage insurance no matter what your loan to value is. On conventional loans mortgage insurance is only charged if you are above 80% loan to value.
Have a Great Day,
Scott Sheely
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