New Lower Down Payment Option For Buyers?

New Lower Down Payment Option For Buyers?

Ok, we know that FHA offers a very low (3.5%) down payment option for home buyers.  But are the rumors true?  Yep… There is a new lower down payment option for buyers.  OK, technically it’s not NEW, but we haven’t seen in in years.  It’s the Conventional 97% (aka 3% down) purchase loan.  And the good news is that it’s competitive with FHA.

0.5% difference – so what?  That’s a good.  Why I make a big deal out of 1/2 of a percent?  Well, the difference is in the details.  Check this out.

Loan Type FHA 96.5%  Conv 97% No MI
   
Sales Price 400,000 400,000
Down Payment 14000 12000
Financed MI 6755 0
Loan Amount 392,755 388000
P&I 1764 1966
Monthly MI 283 0
 Total Payment PIMI 2047 1966
 Payment Difference 0 -81

This chart if for demonstration purposes only and is not an offer or rate quote.  However, it does the job of comparing these two options for the same sample borrower in today’s specific environment.  As you can see above, there are some significant differences between the two programs.  Typically the conventional product will beat out the FHA product if the borrower has very good to excellent credit.  The FHA typically benefits buyers that need a little more flexibility.

To find out which product is right for you, click the chart above and I’ll be able to give you a quick assessment of which product might be better and how much money you can save.

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