The rate on the FHA loan with zero points will be lower 4.25 percent in Souto’s hypothetical than 4.625 percent for Fannie. (A point is 1 percent of the loan amount.) But FHA’s new mortgage insurance premium charges spoil the rate advantage: $195.41 monthly for FHA versus $123.68 for Fannie’s plan using private mortgage insurance. On a monthly basis, FHA costs $43.30 more a $1,064.67 payment compared with $1,021.37 including principal, interest and insurance. More important for buyers who plan to hold on to their low mortgage interest rates for years, Fannie’s insurance charges disappear when the principal balance on the loan reaches 78 percent of the purchase price of the home knocking $123.68 off the monthly mortgage bill. FHA’s insurance fees of $195.41 a month, by contrast, are a drag until you pay off the loan.
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