Consumer Choice No Consumer Choice Note

MODEL NOTICE
INFORMED CONSUMER
CHOICE DISCLOSURE NOTICE

U.S. Department of
Housing and Urban Development

    OMB Approval No. 2502-0059
(exp. 02/28/2014)

Office of Housing Federal Housing Commissioner

Lenders are not required to use this specific form when making this disclosure. This form is provided as an example of what should be included in this disclosure. Section 203(b)(2) of
the National Housing Act requires a disclosure to assist borrowers in comparing the costs of a FHA-insured loan versus similar conventional loans. This disclosure must be given to
prospective borrowers that may qualify for both FHA-insured financing and a conventional mortgage product. Public reporting burden for this disclosure is estimated to average 30
minutes per response including time for reviewing instructions, searching existing data sources, gathering and maintaining data needed and completing and reviewing the collection
of information. This agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless that collection displays a valid OMB control number.

In addition to an FHA-insured mortgage, you may also qualify for other mortgage products offered by your lender. To assure
that you are aware of possible choices in financing, your lender has prepared a comparison of the typical costs of alternative
conventional mortgage product(s) below, using representative loan amounts and costs (the actual loan amounts and associated
costs shown below will vary from your own mortgage loan transaction). You should study the comparison carefully, ask
questions, and determine which product is best for you. The information provided below was prepared as of [month and year].
Neither your lender nor FHA warrants that you actually qualify for any mortgage loan offered by your lender. This notice is
provided to you to identify the key differences between these mortgage products offered by your lender. This disclosure
is not a contract and does not constitute loan approval. Actual mortgage approval can only be made following a full
underwriting analysis by your mortgage lender.
FHA Financing
203(b) Fixed Rate

Conventional Financing
97% with Mortgage Insurance

1. Sales Price

$100,000

$100,000

2. Mortgage Amount

$97,000 ($98,455 w/ Upfront Mortgage Insurance
Premium

$97,000

3. Closing Costs

$2000

$2000

4. Downpayment Needed

$5000

$5000

5. Interest Rate and Term of Loan in Years

7.00%/30 Year Loan

7.00%/30 Year Loan

6. Monthly Payment (principal and interest only)

$645.00

$645

7. Loan-to-Value

97%

97%

8. Monthly Mortgage Insurance Premium (first year)

$40.42

$76.63

9. Maximum Number of Years of Monthly Insurance
Premium Payments

Approximately 14 Years

Approximately 13 Years

10. Upfront Mortgage Insurance Premium (if applicable)

$1455.00 (typically included in mortgage amount, line 2)

1 Monthly mortgage insurance premiums are calculated on the average annual principal balance, i.e., as the amount you owe on the loan decreases each year, so does the amount of the monthly premium.
2 Based on an upfront mortgage insurance premium rate of 1.50%.

FHA Mortgage Insurance Premium Information
If you paid an upfront mortgage insurance premium, you will also be charged a monthly mortgage insurance premium
until the loan-to-value ratio of your mortgage reaches 78 percent of the initial sales price or appraised value of your home,
whichever was lower (provided that premiums are paid for at least five years). You will reach the 78 percent loan-to-value
threshold in one of two ways: Through normal amortization as you make your monthly payments, or by paying additional
principal on the mortgage. Your lender can advise you on when the mortgage will reach the 78 percent level through normal
amortization.
If you have a 15-year mortgage and make a downpayment in excess of 10 percent, you will not have to make monthly
mortgage insurance premiums. You will also reach the 78 percent loan-to- value threshold earlier than on longer term
mortgages and may not have to pay monthly mortgage insurance premiums for the full five years. You are required to make
these payments on your FHA-insured loan unless you refinance or the mortgage is otherwise paid in full. If you were not
charged an upfront premium, you will pay the monthly premium for the life of the mortgage.