There’s some great news on the horizon for buyers. Radian, one of the nation’s largest Private Mortgage Insurance providers, will be loosening its guidelines starting July 11, 2011. This will bring a new pool of buyers into the market. “They are trying to show that conventional financing with MI is a better alternative to FHA for the low down payment borrower.” Especially since FHA increased its insurance premium to 1.15% of the original mortgage amount.
One great feature of the new guidelines is the FICO score minimum will be lowered from 680 down to 620. This is lower than the FHA minimum for many lenders. This will make it easier for buyers to qualify for low cost, low down payment loans. Also they will start excepting DU and LP Approve Eligible without having to re-underwrite the loans themselves. This will save time and ensure that the loan goes through without any last minute hiccups.
Only 5 conditions for approval exist and they are simple. First the borrower must contribute at least 3% from his own funds. The borrower must have a 620 FICO score. The other 3 conditions/overlays are on investment properties, 3 to 4 unit residential properties, and attached condominiums in Clark County, NV and some South Florida counties which make them ineligible.
5% Down with NO PMI
One of our most popular loans right now is the 5% down payment with Lender Paid Mortgage Insurance. Basically the buyer pays a slightly higher interest rate to “buy out” the Mortgage Insurance. What they end up with is a much lower payment than on a conventional loan with Mortgage Insurance and a lower payment than the FHA alternative. Previously it was a little harder to qualify because the 680 minimum FICO requirement however after July 11, 2011 this will be only 620. This also helps the buyer qualify for a higher loan amount because the monthly obligation is less. It’s a great loan. Check out the example below. Or you can go to for a more detailed version. In this example the purchase price is $346,000. The savings the buyer will realize is $297/ month with the NO PMI option compared to the FHA equivalent. That’s huge savings. Also it will give your buyer almost $60,000 more in purchasing power on a 30 year fixed loan. This could catapult them from getting a fixer upper to getting the house they dreamed of. That’s powerful and it will help you sell more homes and make more clients happy.