The most commonly used low down payment loan option has been the 3.5% FHA loan. With new FHA guidelines, going into effect June 1st, mortgage insurance (PMI) stays with the loan no matter the equity position and there is an additional upfront premium of 1.75%
SunTrust just released a 3% down conventional loan with reduced PMI.
The PMI is about the same as as the FHA loan
Interest rate is about 3/8’s of a percent higher than a FHA loan. Today a client was quoted 3.2% on the FHA loan vs 3.6% for the 3% down conventional.
First advantage: The 1.75% premium is rolled on top of the loan—99.9% of the time it is financed into the loan – seldom if at all paid out of pocket
But the big news… After two years if you have 20% equity the PMI could be eliminated!
You do need to apply to have the PMI removed and a bank ordered appraisal is required to substantiate the 20% equity.
That could save you $200 a month on a $200K loan!
You can get better a better rate and term with 5% down and the best rate and term with 20% down…
But for buyers with limited cash on hand the 3% down conventional loan is worth exploring.
If you want to know more call me or contact
Tyler Oden with SunTrust at www.tyleroden.com