Typically when we see the phrase “3.5% Down Payment Only” we think of the FHA program. This FHA program is considered the “Saving Grace” for many First Time Home Buyers. Because the underwriting guidelines are not as stringent as Conforming Loan Programs. The credit score required for an FHA loan can go down to 600 with some lenders and still gives a borrower a nice interest rate. The FHA program is for 1 to 4 family homes, townhouses and FHA Approved Condos.
But due to recent changes to the FHA Program the monthly mortgage insurance required on all loans with less than 10% down payment is now required to stay on an FHA program for the full 30 Years. (OUCH) The cost is 1.30% of your borrowed loan amount then divide that amount by 12 month. For example borrow a $300,000 mortgage x 1.30% = $3,900 divided by 12 month = $325 a month for 360 month (30 years)= $117,000. if you kept the mortgage for the whole term. (OUCH).
But don’t worry, FHA’s Low down payment program is not the only game in town.
There is a Conventional Fannie Mae Program at “Faze One Funding, LLC” which offers it through their third party lender. When putting a down payment of only 3% your borrowing 97% from the lender. The monthly mortgage insurance payment goes away after 2 to 3 years or when the loan-to-value reaches 80%. This scenario is much better than the monthly mortgage insurance payment staying on for the duration of your mortgage on an FHA loan. The credit score requirement for this program is 620 and the down payment can be a gift from blood or by-marriage relatives. Right now this 3% down conventional program is only for single family homes (attached or detached) townhomes, condominiums. The maximum loan amount you can borrower is $417,000.
We like this program a lot at Faze One Funding, and feel it is a great alternative to the FHA Program.