One of the oldest mortgage myths has been that if you are putting less than 20% down on a home, you will be paying mortgage insurance. Which of course is costly and no one in their right mind wants to do. The mortgage insurance protects the bank against your default so it’s no surprise that potential homeowners tend to avoid it like the plague.
Good news is that you can put down as little as 5% down as not have to pay mortgage insurance. This isn’t something that widely published or marketed, but is an option available on most conventional loans. Even if the property is a condo. In fact, I have one in escrow right now and it’s working out great for these First Time Home Buyers.
However, the biggest limitation or caveat is that the max loan is $417K. So that limits your sales price to $438K (with only putting 5% down).
If you want to move up in Sales Price, this same program is available in certain High Cost Counties like LA, OC, SF….. but requires 10% down and the max then would be $625K.
Example based on a Sales Price of $425,000
5% Down – $21,250
Loan Amount: $403,750
Today’s Interest Rate: 4.125% (0 points)
Mortgage Insurance: None
Principal and Interest Payment: $1,957
Estimated Impounds: $500 per month (includes property taxes @1.250% plus home owners/fire insurance)
Estimated Total Payment: $2,457
Total Loan Fees: $1,450 (Lender Processing Fee plus Appraisal)
Rate is based on a fico score of 740+ and is based on standard conventional underwriting guidelines. If property is a condo add .125%. Impounds required.
Beau Hodson
About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.
