Profile picture for mikelim323

Are 10% down conventional loans possible? If so, how are they conventional?

I live in california and I know a friend that was able to get 10% down financing through a conventional loan, not fha or any special government program.  How is that possible?
  • February 23 2012 - Los Angeles
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Answers (10)

Best Answer

Conventional loans can actually have a little as 3% down.  Conventional loans encompasses a Freddie Mac or Fannie Mae loan.  Any loan with less than 20% down however will require mortgage insurance.  The lower the down payment the higher the mortgage insurance.  Credit and debt to income ratio can also affect the amount you pay for mortgage insurance as well.  If you have 10% to put down you could also discuss buying out the mortgage insurance upfront instead of paying the monthly mi.  If you have the money to buy it out it could save you thousands.  Do not confuse mortgage insurance with hazard insurance.  Mortgage insurance is insurance to protect the lender against default, it is required if you put less than 20% down.  Hope this helps
  • February 23 2012
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Profile picture for Brookstone Mortgage
I know this is an old question that was dug up for some reason, but I'm horrified that a completely incorrect answer from an agent was selected as best. A loan being CONVENTIONAL has absolutely nothing to do with Fannie Mae or Freddie Mac!
  • September 29 2013
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Actually as long as you have a 620 credit score you can get a conventional loan with 3% down. I know several lenders that offer these loan products, visit our website we can refer you to a Lender, and an agent if you need one.


  • September 29 2013
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Mike,

You're right, given current conditions it can be harder to get the mortgage insurance approved than it is to get the loan approved. But generally speaking most MI companies' guidelines are pretty close to the lender's guidelines will be, with a few exceptions here and there. The big one to look for is you may get an automated underwriting approval on a conforming loan with a high debt-to-income ratio and some of the MI companies have a cap on their maximum DTI ratio that is much lower than an automated approval on the loan might allow. Your loan officer should be paying attention to this up front so there are no issues.

The good news is the MI companies have not been tightening their guidelines for the most part, they have been easing them of late (the tightening happened already in 2008-2009 and now they are getting more reasonable).


Greg
  • February 23 2012
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Profile picture for Cindy Quinton
On a section 184 loan, is the origination fee considered MI? I know you can roll that into the loan and it states no monthly mortgage insurance with only 2.25% down.
  • February 23 2012
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" Conventional loans encompasses a Freddie Mac or Fannie Mae loan."
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It's misinformation like this that causes questions exactly like the one the OP asked. 

Robin, what you said is untrue.

There are 2 completely different concepts and everyone confuses them There are Conventional and non-conventional mortgages; then there are conforming and non-conforming mortgages. 

Conventional or non-conventional refers to whether it is a government insured/guaranteed loan or not. (conventional being non government insured/guaranteed) Conforming or non-conforming refers to whether it meets guidelines set forth by Fannie Mae and Freddie Mac. (conforming would meet the guidelines) 

Conventional loans may or may not conform to Fannie Mae guidelines

A loan can be both conventional and conforming or conventional and non-conforming. 

Examples:
$417,000 30 year fixed 5% down = Conventional Conforming
$700,000 30 year fixed = Conventional Non-conforming
$271,050 FHA 30 year fixed = Non-conventional Conforming
$729,750 FHA 30 year fixed = Non-conventional Non-conforming
  • February 23 2012
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Profile picture for mikelim323
Given current market conditions, how difficult is it get PMI?  Is borrower PMI easier to get than lender PMI?  Since the banks have been more hesitant to lend, I would assume that MI companies follow suit?
  • February 23 2012
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Profile picture for Fred Glick
Not only can you do 10% down, but there are even loans with as low as 3% down conventionally.

These are done through a broker like me and sold eventually to Fannie Mae and Freddie Mac with what is called PMI, Private Mortgage Insurance.

Yes, you do need good credit and full income verification, but you can do it!

Fred Glick
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  • February 23 2012
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It's a conventional loan with Private Mortgage Insurance (PMI). You can actually go with only 5% down if you have the credit and can qualify for the PMI company's guidelines.

For those with good credit and at least 5-10% down this is often the way to go compared to FHA as it can be MUCH less expensive of a loan.

Sincerely,
Greg

  • February 23 2012
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Profile picture for shapiroamg
With Private Mortgage Insurance. You can go to 5% down.

Been that way for years.
  • February 23 2012
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