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I am a first time home buyer. My home-buying credit score is 620. I was recently preapproved for an FHA loan with my bank. The interest rate is decent at 3.75%, the only issue is I will have to pay mortgage insurance of $2400 a year for the life of the loan (30years), regardless of the down payment amount.

On the other hand, with a conventional loan, if I put 20%+ down, I don't have to pay mortgage insurance, so I'll save that $2400/yr on mortgage insurance. Although, because my credit score is not great, my interest rate with a conventional loan will be 4.5 and It'll be harder for me to get approved.

Given my situation, I was wondering if it makes sense to apply for a mortgage with credit unions? Is there a good chance they can beat the 3.75% interest rate and omit the mortgage insurance? Are there any tips/tricks for finding a good credit union and getting the best mortgage package, given my credit score? Note my debt is little to none and my income is 100k+, so hopefully that'll help cancel out the less-than good credit score. Appreciate any suggestions.

I was looking at the following credit unions:

https://mycfe.com/

https://www.fairwinds.org/

  • Can you give an idea of the size of the loan that you need? The answer will depend on that. – user32479 Dec 13 '15 at 16:10
  • In the range of 275-300 – AnchovyLegend Dec 13 '15 at 19:55
  • I'm not an expert, but in my experience, mortgage insurance is always required if you're putting less than 20% down, but is only required until you've paid 20% of the mortgage between the down payment and monthly mortgage payments. And 200$ a year in PMI seems quite high, also. Ours was only $25 a month, through a local credit union (that was impressively low, but the average I saw was still well under a hundred.) – neminem Dec 15 '15 at 16:55
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I would think that it makes sense to shop around for several options and you might consider a few credit unions in your search. If you've got a choice between multiple credit unions, I'd investigate at least one on the big end. Assuming that they are going to keep your load rather than selling it to another lender or servicing company, they're willingness to make you a loan will depend not only on your own creditworthiness but also on the portfolio of loans that they are already holding. A bigger institution may have more total loans to give and therefore a greater likelihood of accommodating a loan at your size and term.

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There is a good chance that credit unions can offer yiu a better deal on a loan. They are what banks used to be, true savings-and-loan institutions, and since they're member-owned they may not need to pull as much profit from the loan. They aren't always the cheapest option, but they're always worth investigating. They may also offer programs where you can cut the rate a bit by taking some financial planning classes.

Re avoiding PMI: I don't know what programs ciurrently exist for first-time homebuyers, but I suspect you're stuck with that

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