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3% Conventional Loan Down Payment Program
Most of the homebuyers assume that they need to put twenty percent conventional loan down payment to buy a home. And when we talk about a 3% down payment people think that it is going to be an FHA loan.
That is not always the case. You can make a 3% conventional loan down payment to buy a home. In today’s post, we will learn how to get a 3% down conventional loan and more information about the program.
What is a 3% conventional loan down payment?
In 3% conventional loan down payment, 3% is the down payment. For example, if your property sales price is $100,000, a 3% down payment would be $3,000.
The down payment could be gifted funds or could be coming from your own money, and there is no first-time homebuyer requirement if you are opting for “Home Possible” or “Home Ready” programs.
The gift funds are the money that is not yours. The lender would have to source the gift funds from the person who is gifting you the money and season that money in that bank account for about two months.
Does 3% Down Conventional Loan Payment Include Mortgage Insurance?
The best thing about a 3% conventional loan down payment program is that there is an option of not having to pay mortgage insurance which is called “Lender Paid Mortgage Insurance.”
This option could help bring down your payments. Most of the time, it is built into the interest rate.
So you might pay a slightly higher rate, but because the mortgage insurance isn’t there, your payment could be reduced by a couple of hundred dollars.
Even if you opt to pay the private mortgage insurance included in your mortgagee payments, you have to pay it until the loan to value ratio is paid down to 80%.
The mortgage insurance for a 3% Down Conventional Loan Program is risk-based which depends on your credit score.
How to Qualify for a 3% Down Conventional Loan Program?
The first thing that a borrower needs to do is complete a loan application with your trusted loan officer. The best way to complete a loan application is online as it is the most convenient and fastest way to apply.
Once you apply for the loan, the lender will run a credit check and inform you about the possible options for a 3% conventional loan down payment program. The credit score qualification may vary from lender to lender.
However, according to standard guidelines minimum credit score required could be anywhere between 640 to 680. Apart from your credit score, the lender would also need to check your debt to income ratio.
The debt to income ratio for a 3% conventional loan down payment program is the same as any other conventional loan, which is not more than 50%.
What are the other requirements for a 3% Down Conventional Loan Program?
If you have any credit event in the past, you might have to wait a little longer to get a 3% Conventional Loan Down Payment program.
The other requirement for a % Down Conventional Loan Payment program is that the property should be a single unit primary residence.
You can also buy condos or co-ops which have not more than one unit. The tenure for a 3% Conventional Loan Down Payment program cannot be more than 30 years with only a fixed rate.
Conclusion
There are too many factors to qualify for a conventional loan with a 3% down payment like your employment, credit, and some other parameters.
However, the best way to see if you are eligible for a 3% Conventional Loan Down Payment program is to speak to your trusted loan officer and get the right information.
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