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    The 5% Down Jumbo Conventional Mortgage With No Monthly Mortgage Insurance Saturday, December 12th, 2015

    The 5% down Jumbo Conventional mortgage with No monthly mortgage insurance “PMI” is a terrific financing option for borrowers who want to purchase a home or refinance. For example, it will allow buyers to purchase a home up to $640k in San Diego or $675k in LA with only 5% down, and have the option of No monthly PMI. This new program also allows ALL of the down payment to be giftedCheck out how to qualify for this new Jumbo Conventional mortgage program.

    A Great Option for Buyers Who Need a Jumbo Loan

    The 5% down Jumbo Conventional mortgage is going to help more buyers finance a home in markets like San Diego, Orange County and LA, where a jumbo loan is needed in many areas to purchase a home.

    For example, using this program, buyers in San Diego can purchase a home up to $640k with only 5% down and No PMI, and buyers in LA, Orange County and Northern CA for example can purchase up to $675k with only 5% down, and have No monthly PMI. Each county in California has it’s own jumbo loan limit, click HERE to check your county loan limit, or contact me for more details.

    This new 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.

    Most buyers assume they need a 20% down payment to eliminate the PMI on a mortgage, or they need to go FHA if they only have a limited down payment. This program has an option to eliminate the monthly mortgage insurance “PMI” from the mortgage payment, so this will help buyers obtain an even lower monthly payment.  *Remember, if you put down less than 10% with FHA, you have to pay the monthly mortgage insurance for the life of the loan.

    Let’s compare a conventional jumbo 5% down mortgage with No monthly mortgage insurance “PMI” to other low down payment options on a $610k home purchase.

    Compare the Savings on a $610k Purchase with 5% Down, With and Without Mortgage Insurance

    On this $610k home purchase example, we will compare the savings on a conventional jumbo 5% down loan, with and without monthly mortgage insurance, and a FHA 5% down loan with monthly mortgage insurance.

    To calculate property taxes, we will also use 1.2% of the purchase price, so $610 a month, and $75 a month for a homeowner’s insurance policy, so we can calculate what the total monthly PITI (principal and interest, taxes and insurance) payment is for each scenario.

    Option #1. The figures on the first column, is a conventional 5% down loan with No PMI. The rate on a conventional 30 year fixed with No PMI is 4.25%. The total monthly PITI payment is $3,545.

    Option #2. The figures on the second column, is a conventional 3% down loan with PMI. The rate on a conventional 30 year fixed with monthly mortgage insurance is lower at 4%, but there is also monthly mortgage insurance of $420. The total monthly PITI payment is $3,881.

    Option #3. The figures on the third column, is a FHA 5% down loan with monthly mortgage insurance. The rate on a FHA 30 year fixed is 3.99%, but there is also monthly FHA mortgage insurance of $386. There is also a FHA funding fee of 1.75% due on all FHA loans, this fee of $10,141 was added to the loan amount in this example. The total FHA monthly PITI payment is $3,892.

    As you can below, option #1 with the conventional loan and No PMI will help you obtain the lowest monthly payment and save you the most money. It will save you $336 a month over the conventional loan with PMI, and saves $347 over the FHA loan.

    Over the next 10 years the conventional loan with no PMI will save $24,020 over the conventional loan with PMI, and $53,765 over the FHA loan. You can also see below the total interest and PMI that will be paid on each loan scenario over the next 10 years.

    In Summary. Instead of taking the conventional or FHA loan option and paying the expensive mortgage insurance each month, the conventional jumbo loan with No PMI will get you the lowest monthly payment.

    *Remember, if you put down less than 10% with FHA, you have to pay the monthly mortgage insurance for the life of the loan, click HERE for a summary of the current FHA mortgage insurance rules.

    Frequently Asked Questions for the 5% Down Jumbo Conventional Program With No PMI

    Here are the most frequently asked questions that buyers and real estate agents have in regards to the conventional jumbo 5% down No PMI loan option.

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

    The maximum loan amount you can finance depends on what county you live in, as each county has it’s own Jumbo Conventional loan limit, which is set in place by Fannie Mae at the start of each year. For example, the maximum Jumbo Conventional loan limit in San Diego is $612,150 and $636k for Orange Co, Los Angeles and San Francisco counties. You can check your county loan limit by clicking HERE.

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

    Yes, all of the 5% down payment can now be gifted on this program. Closing costs and reserves can also be gifted if needed.

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

    We only require a 620 credit score to qualify for this loan program. 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% to 4.25%, 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 to purchase a 2nd home or Investment Property?

    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 mortgage options.

    6. 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.

    7. Is this program for first time buyers only?

    No, this program is available to all buyers.

    8. 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.

    9. What is the maximum number of units for a home with the 5% down payment Jumbo Conventional 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 5% down mortgage.

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

    Yes, if you put down 10% or 15% for the 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.

    11. What if I need to borrow over the maximum allowed conventional jumbo loan limit?

    If you need to borrow over the maximum allowed conventional jumbo loan limit, we have a super jumbo loan option where buyers can finance a loan up to $1.5 million with only 10% down and No PMI, so  buyers only have to put down 10% instead of the usual 20%, to eliminate the PMI on a large jumbo loan. Ask me for more details on this loan option.

    Fannie Mae Lowers Down Payment Requirements on other Jumbo Mortgage Programs

    Fannie Mae recently lowered their down payment requirements for other Conventional jumbo mortgage programs. For example, they lowered the down payment requirement on an investment property purchase from 25% to 15%, and a second home from 20% to 10% down, see below.  Both of these options are also available with No monthly PMI.

    The down payment requirement was also lowered on a 3-4 unit primary residence and investment property purchase from 35% to 25%. This is great news for investors who want to purchase investment properties that require jumbo financing, who until now had to save up at a larger down payment to purchase an investment property.

    Here is a summary of all the different Conventional jumbo mortgage down payment requirements.

    There is some good news for self employed borrowers too, as they will only be required to submit one years of tax returns to qualify for conventional jumbo financing.

    Self employed borrowers currently have to submit 2 years of tax returns. I have seen many self employed loans declined over the past several years due to requiring 2 years taxes, as Fannie Mae required an average of 2 years income.

    4 Additional Benefits for Buyers using Conventional Jumbo Financing vs FHA Jumbo Financing

    There are some other great benefits for buyers and agents to use this 5% down conventional jumbo program with No PMI. Here are 4 benefits that all buyers and Real Estate Agents should be aware of.

    1. The conventional jumbo program is a great option for buyers in complexes that are NON FHA approved, so now buyers have more inventory to choose from and agents have more homes to show them!

    2. The conventional jumbo program will help some buyers afford to purchase a single family home instead of a condo, as it frees up having to pay FHA monthly mortgage insurance and HOA dues, which can easily amount to roughly $700-$800 a month on a typical condo jumbo purchase. This will open up a lot more inventory for buyers to purchase.

    3. Conventional jumbo loans do NOT have an anti-flip property policy, so now you don’t have to worry about the FHA’s strict anti-flip policies either!

    4. Compared to conventional jumbo financing, FHA appraisals can be a little more strict in terms of asking sellers for repairs on a property, so this is another benefit of using this conventional jumbo program.

    To help a buyer find a home and get into contract these days, it is important to get creative, and this program is one way to do that!

    Refinance Tip for Homeowners

    This conventional jumbo program also works the same for refinances, as homeowners with limited equity can now refinance up to 95% of their home value with No PMI. For example, many homeowners who bought a home over the past 12-24 months with a FHA jumbo loan and the minimum down payment of 3.5%, have probably gained at least 8% – 10% equity due to appreciation in their local market.

    This loan program will be a great option to help you refinance out of your current FHA jumbo loan with mortgage insurance, and into this conventional jumbo loan option with No PMI, so you can save some extra money and get a lower monthly payment. Removing the FHA mortgage insurance will save most homeowners on average $300-$400 a month.

    If you have any questions about how to get approved for this program, please feel free to contact me at 858-442-2686, or just reply to this message.