Buyers Can Now Purchase With Only 5% Down and NO Monthly Mortgage Insurance
One of the best purchase programs in the market right now for buyers is the 5% down option that has No monthly mortgage insurance “MI”. Too many buyers today assume they have to take monthly mortgage insurance if don’t have a 20% down payment, or they have to take FHA financing that has expensive monthly mortgage insurance if they have a limited down payment. I believe this new purchase option will be one of the most popular programs for buyers in 2012, and especially with first time buyers, as it helps them get into a home with only 5% down, no monthly MI, and a fantastic low 30 year fixed rate! Here is what you need to know about this program.
National Mortgage Professional Magazines Top 25 “Most Connected Mortgage Professionals”
First of all, I wanted to share some good news, as I was recently named in the “National Mortgage Professional Magazines top 25 “Most Connected Mortgage Professionals”. It’s always nice to be recognized for your hard work:). You can check out the article Here (on page 40 of 52)
A positive sign for the Real Estate market
I think it is a positive sign for the Real Estate market that lenders and the mortgage insurance companies have reintroduced the 95% conventional loan product and are now willing to offer this program again. It is another sign the housing market is healing, as investors and mortgage insurance companies are now willing to offer these higher loan to value financing loan programs that have been unavailable for the past few years due to depreciation concerns.
FAQ’s about the NO MI 5% Down Program?
Here are a few of the most frequently asked questions that I get asked about this new program.
What is the maximum loan amount with this NO MI 5% down?
The maximum loan is $417k which is the conventional loan limit. Fyi, this No MI program is available to 90% (only 10% down payment) on jumbo loans up to $546k in San Diego.
Can the buyer receive the 5% down payment as a gift?
Unfortunately no, the 5% funds must come the buyer. The funds have to sourced and seasoned over 60 days. Here is a tip, if you know someone looking to buy in a few months, have them deposit the gift now into their bank account and wait a few months, so the bank will not ask where the funds came from if it is seasoned in their account for 60 days.
Can you get 5% down No MI on 2nd homes or Investment Properties?
The 5% down is for Primary Residences only. On 2nd homes you only have to put down 10% to obtain the NO MI payment option. On investment properties this program is not available, as you have to put down 20%, which eliminates the Mortgage insurance anyway.
How do you “Buyout” the Mortgage Insurance?
It is very simple. All you have to do is take a slightly higher interest rate than normal say (from 4% to 4.375%) and the additional yield (lender rebate) at the higher rate “buys out” the MI. Essentially the mortgage insurance companies get paid upfront.
What credit scores are required to qualify?
Most lenders now only need a 620 credit score to qualify for this loan program. Please note the lower the credit scores the higher the interest rate will be.
Do condos qualify for the NO MI 5% down program?
Yes, you can qualify with only 5% down and get the No MI on condos too.
Aren’t FHA interest rates lower than rates for this program?
FHA rates are lower, but when you factor in the very expensive FHA monthly MI, the FHA overall monthly payment will always be higher than this No MI 5% down option. (*see below for an example comparing both loan options).
Compare the monthly savings on this program to FHA financing
Here is an example below of a 5% down NO MI purchase option compared to a FHA 3.5% down purchase option. In this scenario the buyer is looking to purchase a $375k home. On the left column is the conventional 5% down No MI option. The buyer only has to put down 5%, the overall monthly PITI payment is $2105. On the right hand side is the FHA 3.5 down payment option. The FHA overall monthly PITI (including the expensive FHA MI of $346) is $2426. Because there is NO monthly mortgage insurance, the conventional 5% down No MI option saves the buyer $321 a month and $32,117 over the next 10 years vs the FHA purchase option.
So instead of paying the expensive MI each month with FHA (loan on right), the option of “buying out” the MI will get the lowest monthly payment for the buyer. Or the buyer can turn around and put the additional $321 monthly savings into purchasing an extra $50k in home, and still have the same payment as the FHA buyer. Which means the 5% down No MI buyer can purchase a $425k home for the same monthly payment as the FHA buyer purchasing a $375k home.
A great program for all homeowners
Here is another tip for buyers. Let’s say you want to purchase in a complex that is not FHA approved, you can now use this conventional loan program to get financing in non FHA approved complexes. *There are conventional condo rules to follow, but they are not as strict as FHA’s minimal standards to get condo financing approved (FHA has strict owner occupied ratios, & HOA delinquency rules to meet).
Overall, this new conventional 5% down No MI program is a great purchase option for all buyers, and a great program to share with friends and family. As this program will help buyers obtain home ownership with a minimal down payment, and not have to deal with expensive monthly mortgage insurance every month, so they can maximize their savings. * Fyi this program also works the same for refinances, as borrowers can now refinance up to 95% of their home without having to pay any mortgage insurance, as many homeowners have lost equity over the past few years, this is a great option to help them get a lower monthly payment.
If you have any further questions about how to qualify for this program, please feel free to contact me directly at 858-200-9602 or via email at mdeery@citywidefinancialcorp.com
Tags: 5% down and NO monthly MI, Buyers Can Now Purchase With Only 5% Down and NO Monthly Mortgage Insurance, NO Mi and 5% down only, NO MI with only 5% down payment
This entry was posted on Wednesday, December 21st, 2011 at 12:39 am and is filed under Buyers Can Now Purchase With Only 5% Down and NO Monthly Mortgage Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.