There is good news for buyers. Did you know that buyers can now purchase a condo with 95% conventional financing with NO mortgage insurance “MI”. Instead of just thinking about FHA financing when only a low down payment is available, buyers now have a great opportunity to save additional money each month. In fact, when comparing the monthly payments on a 5% down $350k conventional purchase vs a FHA purchase, a buyer can save an additional $300 a month with the conventional No MI option.

How does this No PMI work?

So how does this NO MI loan work? It is quite simple. A buyer has two choices nowwith conventional financing at 95%, they can take a loan with MI at say 4.375%, or they can take a slightly higher interest rate at 4.625% and “buy out” the MI, the additional yield on the higher rate pays off the MI so now the buyer has a mortgage payment without any MI.

Compare a $350k Conventional NO MI purchase vs $350k FHA

Let’s look at a purchase scenario so you can see the savings that come with this new program. On the example below we have a $350k purchase. On the left side the buyer takes a FHA loan at 4.25% with only a 3.5% down payment, on the right side the buyer takes the 5% down NO MI conventional loan option at 4.5%. The monthly PITI payment for the FHA buyer is $2326, whereas the monthly payment for the buyer who takes the conventional NO MI loan is $2026.

Check out the monthly savings

As you can see below, that is monthly savings of $300 by taking this NO MI option. That is a car payment for many people these days. Or the buyer can turn around and use these savings to purchase a larger home, an extra $300 a month will help the buyer purchase an extra $50k in home.

Check out the savings over the next 10 years

Over the next 10 years the savings really add up. See below in ten years time the buyer with the conventional NO MI loan will save an additional $32,829 over the FHA buyer. If the buyer invests this correctly in some other form of interest bearing account, this amount can grow even larger.

I think this is one of the better loan programs out there today, as this program allows a buyer to either #1, purchase extra home with the additional monthly savings, or #2, puts additional savings back into a buyers pocket. For example, the $300 a month savings from this loan scenario above can go along way to help improve a buyers lifestyle after they purchase a home.

Let buyers know

From the majority of real estate agents and buyers I talk to, many did not know this program exists, so make sure to let everyone you know who is interested in buying a home know about this program. Also for example, if you know someone who wants to purchase in a complex that is not FHA approved, this is now a great option for them to get conventional financing instead. There are of course a few details that a buyer will need to know to qualify for this 95% financing on condos, so feel free to contact me directly for information.

Also, this program is available on refinances too, so if you know someone who thought they had to be at or under 80% loan to value to qualify for a conventional loan and get the best rates, they can now get excellent rates up to 95% with NO MI. Feel free to contact me for details on this program works on refinances too.

I hope you found this information useful. Feel free to contact me directly at 858-200-9602 if you want to chat about the best way to use this program to meet your buying goals. I Look forward to chatting soon.