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Buyers Don’t Need 20% Down to Remove the Monthly Mortgage Insurance “PMI” on a Home Purchase Friday, March 16th, 2018

Most home buyers today assume they need to put down 20% to eliminate the monthly mortgage insurance “PMI” on a mortgage. I probably get asked this question as much as any other when it comes to mortgages. With Conventional financing, you only have to put down 5% to remove the monthly PMI on a home purchase up to $685k in San Diego, and $715k in LA and Orange County for example. Instead of waiting to save up more money for the down payment to try and purchase a home while home prices and rates continue to rise, you can put down as little as 5% with this program. Check out how to qualify below.

Check out Saturday’s San Diego Union Tribune

If you read the San Diego Union Tribune, check out Saturdays Home Pride section. I was interviewed for a piece discussing the current housing market for home buyers.

Buy a Home With Less Than 20% Down With No PMI for Buyers

With Conventional financing, you only have to put down 5% to remove the monthly PMI on a home purchase.

The 5% down Conventional Jumbo mortgage with No PMI is helping lots of buyers finance a home in markets like San Diego, Orange County and LA, where a jumbo loan is needed to purchase a home.

Each county in California has it’s own conventional jumbo loan limit, click HERE to check your county loan limit, or contact me for more details.

This program also allows ALL of the down payment to be gifted, so buyers can reach out for a gift instead of having to wait and save up the full 5% down payment.

*If you put down less than 10% with FHA financing, you have to pay the monthly mortgage insurance for the life of the loan.

Purchase a $675k Home With Only 5% Down and No PMI

Let’s take a $675k home purchase and compare the savings with the 5% down Conventional Jumbo loan with No monthly PMI, versus a Conventional Jumbo loan with regular monthly PMI, and a 5% down FHA Jumbo loan with expensive monthly FHA mortgage insurance.

To calculate the total monthly PITI (principal and interest, taxes and insurance), we will use 1.2% of the purchase price to calculate property taxes, which is $675 a month, and $75 a month for homeowner’s insurance.

Option #1. The figures on the first column is a conventional 5% down loan with No PMI. The rate is 4.75% on a conventional jumbo 30 year fixed with No PMI. The total monthly PITI payment is $4,095.

Option #2. The 2nd option is a conventional 5% down loan with monthly PMI. The rate is 4.5% on a conventional 30 year fixed, the monthly PMI is $298. The total monthly PITI payment is $4.297.

Option #3. The 3rd option is a FHA 5% down loan with monthly mortgage insurance. The rate is 4.375% on a 30 year fixed rate, the monthly FHA mortgage insurance is $543. There is also a FHA funding fee of 1.75% due on all FHA loans, this fee of $11,221 is financed into the loan amount. The total FHA monthly PITI payment is $4,556.

Option #1 with No PMI will help you obtain the lowest monthly payment. It will save you $202 a month over the conventional loan with PMI, and saves $461 a month over the FHA loan.

As you can see below, over the next 10 years the conventional loan with no PMI will save $17,506 over the conventional loan with PMI, and $57,594 over the FHA loan.

In Summary. To obtain the lowest monthly payment and the most long term savings, the conventional jumbo loan with No PMI will get you the lowest monthly payment.

FAQ’s for the Conventional Jumbo 5% Down Mortgage with No PMI

Here is a list of frequently asked questions and answers that realtors and buyers have on the conventional jumbo 5% down loan option with No PMI.

1. What is the maximum loan amount with the Jumbo 5% down program?

The maximum loan amount with 5% down is $679,650 for for Orange Co and LA County and SF, San Diego is $649,750. You can check your county loan limit HERE.

2. Can I receive the 5% down payment as a gift?

Yes, all of the 5% down payment can be gifted on this program. Closing costs and reserves can also be gifted if needed. We can also give a lender credit to help pay closing costs too.

3. What credit score is required to qualify for this program?

We require a 620 credit score to qualify for conventional financing. A 680 score is required to remove the monthly PMI depending on what your down payment is. Please note, the lower the credit scores the higher the interest rate will be.

4. How do you eliminate the monthly mortgage insurance “PMI’ option on this program?

It’s very simple. All you have to do is take a slightly higher interest rate than normal, say from 4.5% to 4.75%, and we use a lender credit with the higher interest rate to eliminate the PMI from the mortgage payment. This is also known as lender paid mortgage insurance.

5.  Can I get 5% down with No PMI on 2nd homes or Investment Properties?

No, the 5% down is for Primary Residences only. You have to put down 10% for a 2nd home and 15% down for an investment property. The NO PMI option is also available on both.

7. Are co signers allowed on this program?

Yes co-signers are allowed on this program, the co-signer does NOT have to reside in the home.

8. Is this program for first time buyers only?

No, this program is available to all buyers.

9. Do condos qualify for this program?

Yes, you can also purchase a condo using this program with only 5% down and get the No PMI option.

10. What is the maximum number of units for a home with the 5% down payment mortgage?

The 5% down mortgage is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes. 2-unit homes, 3-unit homes, and 4-unit homes cannot be financed with the conventional 3% down mortgage.

11. What if I put down 10% or 15%, will I get a lower rate?

Yes, if you put down 10% or 15% as a down payment, you will get a lower interest rate. With conventional financing, the larger the down payment, the lower the interest rate you will get.

If you have any questions about any of these programs or getting approved for financing, please feel free to contact me at 858-442-2686. I look forward to chatting soon.

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