3 Percent Down Conventional Loans?
If you’ve been reading any news articles about the housing market over the past couple of years, you’ve probably heard a fair share about FHA Mortgages. More specifically, you’ve heard that a very large amount of people getting housing loans these days are using FHA-insured loans to obtain financing for their homes, as opposed to Conventional Mortgages.
The specifics of an FHA mortgage can be found here, but I wanted to inform you that there is a 3% down payment Conventional Loan program available to First Time Home Buyers. This is not necessarily an advertisement for these loans–since you’ll have to meet with a mortgage officer to determine what type of loan fits you best–but rather an examination of the loans’ terms.
Most other Conventional Loans require 5, 10, or even 20 percent down payment, which typically doesn’t work for new buyers, at least not here in Minnesota. So what are the details of the 3% down Conventional mortgage?
First, there is only 1 Private Mortgage Insurance company in town that will insure these loans, so there aren’t a lot of options to speak of in that department.
Second, your Credit Scores have to be above 700 at least, which eliminates buyers with only average credit marks.
Third, the Mortgage Insurance rates are over 1% of the purchase price, which is higher than FHA standards.
Fourth, your debt-to-income ratios have to be less than 45%, which basically means your monthly payments for the house have to be under 45% of your Gross Monthly Income, while some buyers are getting approved at over 50% right now.
Fifth, and maybe the biggest impact, these 3% Conventional Loans may not be used with the MN Housing first time buyer assistance programs, which allows for down payment help among other perks.
If you’re curious to find out what type of loan would work best for you, contact me to learn more about the buying process and your financial picture.
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This is great news indeed Steve! I am very anxious to hear about thie new loan program. It is amzing indeed to see how many buyers are going FHA in our local real estate market here.