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Options With Less Than 20% Down; No More 2nds; MI Is Best if Borrower Is Very Strong

If a buyer has less than 20% of the Purchase Price for a Down Payment, there are far fewer options than there were two years ago.

Concurrently funded 2nd mortgages and/or equity lines no longer exist. The only options now are Mortgage Insurance or FHA Financing.

For well qualified borrowers, Mortgage Insurance is still the best option because it remains cheaper than FHA financing because there is no “Up Front Mortgage Insurance Premium” (1.75% of loan amount for FHA).

But, Mortgage Insurance, in most cases, now requires exceptionally strong borrowers with low debt ratios (below 41%) and excellent credit (scores above 740). In addition, there is no Mortgage Insurance available for loans above 85% LTV for High Balance Loans (above $417,000) in California. And there is no Mortgage Insurance available for loans above 90% LTV for Low Balance Loans (below $417,000) in California.

FHA, on the other hand, goes to 96.5% LTV even if the buyer’s credit score is as low as 620. The drawback to FHA again is the Up Front Funding Fee of 1.75% of the loan amount.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167