Conventional Loans with 3% Down – They Are Real!
Now might be a good time to think about a Conventional loan with only 3% Down. Why you ask? Well with FHA’s new mortgage insurance policy in place for both the 30 year and 15 year loans, a good alternative is a Conventional loan especially when we can get you one with only 3% down!!
The main reason is that on a conventional loan the mortgage insurance drops off when the loan to value reaches 78%. Unlike with FHA where the mortgage insurance continues for the life of the loan regardless of loan to value, conventional loans offer an out at a certain point. On average we find that conventional mortgage insurance on this loan tends to be about 30% less than that on FHA.
For those of you trying to conserve your cash and don’t want the mortgage insurance on your loan for its life then a 3% down conventional loan is the answer.
Another great use of this is when you have a home to sell but it’s not sold before closing. We have had several instances where someone is selling a home which will provide them with a substantial down payment but they don’t have it yet. In a case like this we can close with 3% down and then once the other home seller we will allow a principle reduction and will re-amortize the loan with hopes to have enough equity as to avoid any future mortgage insurance.
You might be wondering if this applies to renovation loans. Unfortunately it does not however if you need a low down payment on a renovation loan don’t forget about the FHA 203k. The down payment is still 3.5% and while there might be mortgage insurance there is a chance that later on down the road we can refinance you, using your great equity position, into a convention loan.
Want to stick with the conventional route but need a renovation loan? We also have the HomeStyle Renovation Loan which is Fannie Mae’s answer to the conventional renovation loan. The down payment starts at 5% on this one but the important thing to remember is that the mortgage insurance follows the same rules – can be removed when the loan to value hits 78% or when you purchase at 80% loan to value.
A big thing to take into account is credit score. With a conventional loan, especially one that only has 3% down you would want to have a FICO score in the 760+ range. Reserves are another big thing to consider. Having funds in a 401k, IRA, savings, etc is a plus when you are applying for a conventional loan. Since the loan is Underwritten by our Underwriter as well as one with the mortgage insurance company we want to present as nice of a file as possible. The name of the game is making the Underwriter feel as comfortable as possible with the information they have been presented with to review.
Of course, as with any loan, conditions and guidelines do apply so please call me for details about the Conventional with only 3% down. As stated they do exist so let us write a conventional loan with 3% down for you today.