As the housing market continues to strengthen in many areas, lenders are coming up with creative low down payment financing options with No monthly mortgage insurance “PMI”, to capture more market share and drive more buyers their way. There are 4 terrific financing options now available for home buyers in California who have a limited down payment and do not want to pay monthly PMI, and this includes options for jumbo buyers who do not want to use all their cash towards a down payment.
4 low down payment options with no PMI for buyers
Too many buyers in today’s marketplace assume they have to take a loan with monthly mortgage insurance “PMI” if they have a limited down payment, or they need to put down 20% to eliminate the monthly mortgage insurance on a jumbo loan.
Home buyers in the CA market now have 4 different financing options available, if they a limited down payment and do not want to pay monthly mortgage insurance.
1. Put just 3% down and you can finance a loan up to $417k with no monthly mortgage insurance “PMI”.
2. Put down 10% and you can finance up to $625,000 with no PMI, which is the conventional jumbo loan limit in LA, OC or SF. It is $546,000 in San Diego.
3. Put down 15% and you can finance a loan up to $1 million with No PMI. This option is available on a ARM and a 30 year fixed.
4. Put down just 10% and you can finance a loan up to $3 Million with no monthly PMI. This option is also available on a ARM and a 30 year fixed. This loan option is available for the best qualified buyers, ask me for details how to qualify.
Compare the Savings on a 10% Down $600k Purchase, With and Without Mortgage Insurance
On this $600k home purchase example, we will compare the savings on a conventional 10% down loan, with and without monthly mortgage insurance, and a FHA 10% down loan with monthly mortgage insurance.
To calculate property taxes, we will also use 1.2% of the purchase price, so $600 a month, and $85 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 10% 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 $3,341.
Option #2. The figures on the second column, is a conventional 10% down loan with PMI. The rate on a conventional 30 year fixed with monthly mortgage insurance is lower at 4.125%, but there is also monthly mortgage insurance of $311. The total monthly PITI payment is $3,613.
Option #3. The figures on the third column, is a FHA 10% down loan with monthly mortgage insurance. The rate on a FHA 30 year fixed is lower at 3.875%, but there is also monthly FHA mortgage insurance of $366. There is also a FHA funding fee of 1.75% due on all FHA loans, this fee of $9,450 was added to the loan amount in this example. The total FHA monthly PITI payment is $3,628.
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 $271 a month over the conventional loan with PMI, and saves $287 over the FHA loan.
Over the next 10 years the conventional loan with no PMI will save $17,199 over the conventional loan with PMI, and $36,516 over the FHA loan.
In Summary. Instead of taking the conventional or FHA loan option and paying the mortgage insurance each month, the conventional jumbo loan with No PMI will give the buyer the lowest monthly payment.
Remember too, with the new FHA mortgage insurance rules, the FHA buyer has to pay the FHA mortgage insurance for a minimum of 11 years, click HERE for a summary of the current FHA mortgage insurance rules.
Frequently Asked Questions for the 10% Down Jumbo Program With No PMI
Here are the most frequently asked questions that buyers and real estate agents have in regards to the conventional jumbo 10% down No PMI loan option.
1. What is the maximum loan amount with 10% down?
The maximum conventional jumbo loan limit with 10% down and No PMI for buyers in San Diego is $546k, so they can purchase a home up to $600k. Buyers in LA and SF can finance a loan up to $625k, which means they can purchase a home up to $695k with only 10% down. Each county in California has it’s own jumbo loan limit, you can check your county loan limit HERE.
2. Can the buyer receive the 10% down payment as a gift?
Only 5% of the funds have to come from the buyer, the other 5% down can be gifted.
3. What credit score is required to qualify for this program?
We only 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.
4. How do you Eliminate the Mortgage Insurance?
It’s very simple. All you have to do is take a slightly higher interest rate, from 4.375% to 4.625% (see example above), and we use a lender credit with the higher interest rate to eliminate the monthly mortgage insurance from your payment. So now the mortgage insurance is paid by the lender.
5. Can you get 10% down with No PMI on 2nd homes or Investment Properties?
No, the 10% down is for Primary Residences only. On 2nd homes, you only have to put down 15% 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.
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 for all buyers.
8. Are there income limits for this program?
No, any buyer can qualify for this program regardless of income.
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 if I put down 15%, do I get a lower rate?
Yes, if you put down 15% as a down payment, you will get a lower interest rate. Essentially the larger the down payment, the lower the interest rate you will get with all conventional loan programs.
11. Can I finance a higher loan amount with 10% down?
Yes, we have a loan option where buyers can finance a loan up to $3 million with only 10% down and No PMI, so now buyers only have to put down 10% instead of the usual 20%, to eliminate the PMI on a jumbo loan to $3 million. Ask me for more details on this loan option.
REFINANCE TIP for Homeowners
These programs with No PMI also work the same for refinances, as homeowners with limited equity can now refinance up to 90% or 95% of their home value with No PMI.
For example, many homeowners who bought a home over the past 12-24 months using a FHA loan or a loan with monthly PMI, have probably gained at least 10-15% equity again due to appreciation. So this loan program is a great option to help them refinance out of their current loan with mortgage insurance, and into a NO PMI option, and save some extra money and get a lower monthly payment.
We have been able to help many of our clients who bought a home over the past 2 years with a loan with mortgage insurance, refinance into a loan with No monthly mortgage insurance and save on average $200-$300 a month, or convert their loan into a 20 or 25 year fixed using the same monthly payment.
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.