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Switching FHA to Conventional and Conventional to FHA When it's Appropriate

A drop in credit score doesn't always mean you can't get a loan. As a mortgage broker we can switch lenders and/or switch programs to accommodate.

Two days before we were closing Erika’s mortgage, the lender ran a new credit report and her scores dropped 100 points, from 760 to 660, because of the drop in scores, instead of getting a 3.125%, 15 year conventional loan, her rate would have to be increased to 3.5%. 

I recommended that we convert the loan to an FHA loan. Even though there was a 1.75% mortgage insurance premium added to the principal balance, we had to do an FHA appraisal and it would take more time before we close, these were the negatives. The positive was that her interest rate was 2.875%.

Her monthly payment ended up being almost identical, so in this case it made sense to make the switch instead of paying a higher monthly payment.

Our responsibility is to make sure that our clients end up with the best possible result, no matter how much extra time it takes. It is all about the math, if it is in the best financial interest to switch loan products, then that is what needs to be done.

FHA Refinance Volume Up Over Last Year

By: Rosemary Rugnett

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

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