Expert: Dottie Worthington - 3/3/2009

Question
Hello,  I currently have an FHA home for sale, but in the meantime, I have completed another contract on a new home because my sister and her 2 disable children moved in.  They have been living with me a year and my space is very small.  I was told that I cannot qualify for another FHA loan because of the guideline restriction.  I do not have 25% equity into my present home and my mid score is only 603.  Therefore, I have to go convention.  But I guest what I do not understand is why am I getting hit with so many discount points.  5.625%.  Can you explain?

Answer
These mortgage companies make their money from the discount points. The more of a risk the more they charge. Doesn't make sense does it?
In years past the government backed those FHA loans and they were getting the sellers to pay those fees, and the price was inflated. Hence all the foreclosures. Now you understand the mortgage crisis. It was brought on by all those government funded loans, like FHA, and the people could not afford them. Now we all have to pay for that.