You Can Now Buy a Home With Only 5% Down Without Monthly Mortgage Insurance
One of the best and least used purchase programs in the Knoxville Real Estate market right now for buyers is the 5% down option that has No monthly mortgage insurance “MI” payment. Too many Knoxville home buyers today assume they have to take monthly mortgage insurance if they do not put a 20% down payment, or they have to go with FHA financing that has increased their monthly mortgage insurance. I believe this new purchase option will be one of the most popular mortgage programs for Knoxville and East Tennessee home buyers this year
Good News for the Real Estate Market.
I think it is a good sign for the Knoxville Real Estate Market that mortgage lenders and PMI companies have brought back the 95% conventional loan and are willing to offer this product on Knoxville and East Tennessee homes.
FAQ’s about the NO MI 5% Down Program?
What is the maximum loan amount with this NO MI 5% down?
The maximum loan is $417,000 which is the conventional loan limit.
Can the buyer receive the 5% down payment as a gift?
Unfortunately the answer is they cannot, the 5% must come the buyer’s own funds. . (If gift funds are needed the buyer will need to consider an FHA Loan.) The funds have to sourced and seasoned for 60 days
How do you “Buyout” the Mortgage Insurance?
It is very simple. All you have to do is take a slightly higher interest rate than normal say (from 4% to 4.375%) and the lender credit (lender rebate) at the higher rate will be used to “buy out” the MI. The mortgage insurance companies get paid a single payment up front instead a monthly premium.
Are there reserves required for this loan program?
Yes, usually the program requires 2 months reserves, which is equal to 2 months of your total monthly mortgage payment.
What credit scores are required to qualify?
Most lenders now only need a 620 credit score to qualify for this loan program. Please note the lower the credit scores the higher the interest rate will be.
Can I buy a condo with this NO MI 5% down program?
Yes, you can qualify with only 5% down and get the No monthly MI on condos too.
Aren’t FHA interest rates lower than rates for this program?
FHA Interest rates are lower; however the payment for this loan program will result in a lower monthly mortgage payment for the Knoxville or East Tennessee Home Buyer.
A $200,000 home would require a monthly mortgage insurance payment of $201.04 on a FHA Loan, while a conventional loan with a .375% higher interest rate would only increase the monthly mortgage payment by about $50 per month.
This new conventional 5% down payment with no MI loan is a great purchase options for all home buyers, and a great program to share family and friends, as it may help someone you care about buy a new home with a small down payment and still not have to pay expensive mortgage insurance each month.
If you are looking to purchase a home in Knoxville or East Tennessee, please give me a call to discuss your options and to find the best loan program for the purchase of your new home.