Wednesday, April 23, 2014
PLACERVILLE, CALIFORNIA
99 CENTS

Conventional financing verses government financing

By Mike Southwick

After the real estate bubble burst in 2007 we saw a significant shift in the type of loans that most people chose to pursue.

Prior to 2007 there were all sorts of options available — zero down, interest only, adjustable rate mortgages and even negative amortization type loans. After 2007 and going forward the most popular non-conventional loan (especially for first-time buyers) was the government backed FHA loan which only required 3.5 percent down and allowed for marginal credit scores.

These types of loans were probably the go-to loans for most people trying to get into or back into the market for the last six to seven years. It could be argued that this type of loan helped jump-start the home buying wave that has turned into quite a current feeding frenzy. The down side or unintended consequences from this large investment by our U.S. Government is it has created a rather large mortgage portfolio that has huge risks that come with such extreme leverage and this is resulting in the government needing to increase its mortgage insurance premiums.

As of April 1, 2013, the FHA mortgage insurance will increase again, and then after June 3, 2013, the mortgage insurance will remain for the life of the loan as opposed to dropping off at a certain point on loans issued prior to June 3.

What does all of this mean? If you are in the hunt for a home and need a mortgage you should really
evaluate the cost of a FHA loan over a 30-year period especially in relation to the mortgage insurance
question. Currently there are some 5 percent down payment conventional programs where the overall cost
might be less than a FHA backed mortgage, making the conventional route now a little more appealing.
This is not for everyone but you should have a good mortgage advisor/coach along with a good Realtor
who knows their stuff to properly advise you and protect your interests.

Each person’s interests are different and you should use caution before getting caught up in the frenzy of making a bad decision when it comes to obtaining a loan. Some rural areas located in El Dorado County, Amador, Sacramento County, Placer County and others have USDA funds available for 100 percent financing and a good mortgage advisor can help you with that.

As we see conventional financing make a comeback it may be wise to evaluate a 15-year mortgage,
especially in light of the potential changes that may be coming in relation to the Mortgage Interest
Deduction (aka MID) that is currently being discussed in Congress. The old rule of thumb might have
been to carry a high mortgage balance for 30 years that in turn provided a large write off for tax
purposes and, for some, this may still be a good strategy. As the political debate over the MID continues, I
believe that we should have a contingency plan in the event that it is modified or eliminated and this is
something you should discuss with a tax or financial professional.

Mike Southwick is managing broker at Century 21 Select – El Dorado County.

Special to the Democrat

LEAVE A COMMENT

Discussion | No comments

.

News

Downtown group coordinates painting, awnings

By Wendy Schultz | From Page: A1

 
More mountain lion sightings reported

By Dawn Hodson | From Page: A1, 8 Comments

 
Supervisor Nutting trial begins

By Cole Mayer | From Page: A1, 69 Comments | Gallery

Sanford murder case to jury

By Cole Mayer | From Page: A1 | Gallery

 
Herard over the back fence: Try fishing at Wakamatsu

By Bob Billingsley | From Page: B1

Gearing tax questions to correct office saves time

By Treasurer-Tax Collector | From Page: A3

 
.

Opinion

My turn: More than a buzzword

By Special to the Democrat | From Page: A4, 23 Comments

 
Building restored

By Mountain Democrat | From Page: A4

 
Outstanding dog

By Mountain Democrat | From Page: A4

.

Letters

‘Parents, be afraid’ letter

By Letters to the Editor | From Page: A5, 19 Comments

 
Ukranian situation

By Letters to the Editor | From Page: A5, 4 Comments

Misquote

By Letters to the Editor | From Page: A5, 8 Comments

 
Altshuler framing

By Letters to the Editor | From Page: A5, 8 Comments

National Day of Prayer

By Letters to the Editor | From Page: A5, 2 Comments

 
.

Sports

Pedal power at the forefront next month

By Jerry Heinzer | From Page: A6 | Gallery

 
Outside with Charlie: Transitioning

By Charlie Ferris | From Page: A6

Pitching the ‘Root’ cause of Trojans’ victory

By Mike Bush | From Page: A6 | Gallery

 
Sports Scene: April 22, 2014

By Democrat Staff | From Page: A7

Roundup: April 22, 2014

By Democrat Staff | From Page: A7

 
.

Prospecting

4-H’ers star at showcase

By Dawn Hodson | From Page: B1 | Gallery

 
At a glance: Look for fireballs

By Mimi Escabar | From Page: B2, 1 Comment

Authors to share their stories

By Pat Lakey | From Page: B2, 2 Comments

 
Church to host human trafficking conference

By Pollock Pines | From Page: B3

Grow For It! Flower of Easter

By Barbara Schuchart | From Page: B5

 
.

Essentials

Crime Log: April 1-3

By Cole Mayer | From Page: A2

 
Weather stats 4-22-14

By Michael Raffety | From Page: A2

Building permits 4/7-11/2014

By Michael Raffety | From Page: A2

 
.

Obituaries

Bobby Lloyd Bridges

By Contributor | From Page: A2

 
Harry Frank Harper

By Contributor | From Page: A2, 6 Comments

Marion “Wayne” Griswold

By Contributor | From Page: A2

 
.

Real Estate

.

Comics

New York Times Crossword

By Contributor | From Page: A8

 
Flying McCoys

By Contributor | From Page: A8

Speed Bump

By Contributor | From Page: A8

 
Tundra

By Contributor | From Page: A8

Horoscope, Thursday, April 24, 2014

By Contributor | From Page: A8

 
Horoscope, Wednesday, April 23, 2014

By Contributor | From Page: A8

Working It Out

By Contributor | From Page: A8

 
TV Listings

By Contributor | From Page: A8

Shoe

By Contributor | From Page: A8

 
Sudoku

By Contributor | From Page: A8

Rubes

By Contributor | From Page: A8