5% Down payment without PMI?

ppl1228
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I'm looking to buy a house but only have about 5% downpayment. Is there any program out there that I can avoid paying PMI? I can probably have 10% down if there is program to avoid PMI at that.

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June 21 2012 - Alhambra

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Answers (10)

Best Answer

Brian Goetz, "bri_gets"
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Please don't get confused between not paying MI at all and not having to pay a monthly MI.   You can avoid paying the monthly MI by getting lender paid mortgage insurance. That is where the lender charges you a higher interest rate and uses the extra rebate to cover the cost of the mortgage insurance. Most homeowners don't think they have MI becuase they don't see it in their monthly payment, but it is there.

Any chance that the seller will carry back a second mortgage?   Then you could do a 80% first mortgage, a 15% seller carried second mortgage, and 5% down payment. (Called an 80/15/5)

If you do put down 10%, you should be able to do an 80/10/10 with some banks. US Bank comes to mind.   Under this scenario there is no MI because your first mortgage is at 80% or lower.

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June 21 2012

Phil Caulfield, "dad394"
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Here is a program that offers 5% down with no PMI

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November 30 2012

SteveMoran4
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Hi PEOPLE!!!
FYI, GO WITH UNION BANK. I JUST GOT APPROVE WITH THEM WITH A 5% PERCENT DOWN AND INTEREST AT 3.2% AND THEY WILL COVER THE 95% FINANCING.
UNDER A PROGRAM CALLED

"Economic Opportunity Mortgage"
FOR LOW INCOME PEOPLE.

WITH NO PMI NEEDED>> WHICH IS WHAT I WAS LOOKING FOR ALSO..

GOOD LUCK EVERYONE

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November 05 2012

Mike Bjork, "MortgagePlannerMike"
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Possibly. The question may be what happens when interest rates rise, which most likely will happen within next few years. Your second mortgage payment will most likely rise too, as most seconds are HELOC (Home Equity Lines of Credit), which are adjustable. There's not a big difference in the interest rate between a 80/10/10 and having a 90% loan with the MI being paid upfront, thus eliminating the monthly MI with a slightly higher interest rate (and full payment remains fixed throughout the duration of you holding that mortgage).

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June 21 2012

ppl1228
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Thanks Mike! thats helpful. At least I know 80/10/10 still exist to prevent MI. I would think it would be more economical than having 90/10 and pay MI?

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June 21 2012

Mike Bjork, "MortgagePlannerMike"
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80/10/10 means that you have financing with a first mortgage to 80% (to prevent MI), the first 10 means that you will have a second mortgage of 10% of the sales price (for a total of 90% financing, but broken down into 2 loan amounts) and the second 10 represents the 10% down payment. Some Lenders are willing to provide a second mortgage up to a total of 90% financing, but they're not willing to go to 95%; which is why I believe Brian indicated a Seller carry-back. That just means that you will receive a first mortgage of 80% from a lender and the Seller will provide you a mortgage (thru the equity of the property) for the remaining 15% (so your making payments to the Lender and Seller). The drawback on the second mortgage is when interest rates rise, then your second will most likely rise too (vs. having a fixed rate mortgage (which also means fixed payments) for your entire loan amount.

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June 21 2012

ppl1228
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Thanks Brian! So how does the 80/10/10 or 80/15/5 work? Does it require the seller to approve of somehting as I don't quite understand what "...carry back a second mortgage.."means?

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June 21 2012

Mike Bjork, "MortgagePlannerMike"
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If the loan amount is less than $417k, then we have a program that will eliminate the monthly MI with only 5% down payment. Assuming the credit and property profiles qualify. To answer your question, then yes, the monthly MI may be able to be eliminated.

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June 21 2012

Greg Cowart, "Roseville Loan Guy"
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Yes and no. Aside from VA and USDA programs, you can pay a lump sum premium and avoid monthly MI. Or have the lender pay it for you with rebate pricing, there is still MI but you don't pay for it in that scenario. Conventional with 5% down is a great way to go compared to FHA, IF you can qualify anyways. Sincerely, Greg