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  • 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 purchase option will be one of the most popular programs for buyers in 2013, and especially with first time buyers, as it helps them get into a home with only 5% down, no monthly PMI, and an excellent low 30 year fixed rate! Here is how to qualify for this program.

    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 are offering 95% financing to buyers. 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 several years.

    FAQ’s about the NO PMI 5% Down Program?

    Here are a few of the most frequently asked questions that buyers ask about this program.

    What is the maximum loan amount with this NO PMI 5% down?

    The maximum loan is $417k which is the conventional loan limit. Fyi, this No PMI 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.

    Can you get 5% down No PMI on 2nd homes or Investment Properties?

    No, the 5% down is for Primary Residences only. On 2nd homes you only have to put down 10% to obtain the NO PMI 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’s very simple. All you have to do is take a slightly higher interest rate than normal say (say from 4% to 4.25%) and we use a lender credit that is available at the higher rate to eliminate the PMI from the monthly payment.

    Are there reserves required for this loan program?

    Yes, usually the program requires 1 months reserves, which is equal to 1 of your monthly mortgage payments.

    What credit scores are required to qualify?

    Most lenders require a 660 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 PMI 5% down program?

    Yes, you can qualify with only 5% down and get the No PMI 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 mortgage insurance, the FHA overall monthly payment will always be higher than this No PMI 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 PMI 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 PMI option saves the buyer $321 a month and $32,117 over the next 10 years vs the FHA purchase option.

    facebook-conv-vs-fha-jan-14th-mmi1

     

    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 PMI 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 PMI 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

     

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    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.