3% Down Payment Conventional Condo Loans are Back
When the condominium market crashed in 2007, most lenders became skittish with condo purchase loans. For the past several years, condo buyers commonly had to come up with a down payment between 10 to 20% of the purchase price for conventional loans. Fortunately, FHA filled the gap with its popular 3.5% down payment option, but even then only a small percentage of Seattle condo buildings are eligible for FHA loans.
Caliber Home Loans, a Kirkland,WA-based mortgage bank and a preferred lender of Seattle Condos And Lofts, is now offering 3% down payment conventional loans for condo purchases.
In addition to the low down payment, another feature for borrowers is the ability to pay the mortgage insurance premium in one lump sum upfront. While it would add to a buyer’s closing costs, it would be less expensive over the long run and would reduce the monthly payment by up to a few hundred dollars (depending on loan amount). For a $200,000 loan with a well-qualified buyer, the upfront mortgage insurance fee would be approximately $5,400 with no monthly mortgage insurance payment.
The program also allows a seller’s contribution of up to 3% of the sales price towards the buyer’s closing costs, which may include the upfront mortgage insurance amount.
Unlike FHA, Caliber’s 3% down program is available to all condo properties, provided the condominium meets Fannie Mae guidelines.
So what’s the catch? The tradeoffs for the lower down payment are added fees and a higher interest rate given the higher loan-to-value amount, but it’s still competitive. It’s best suited for well-qualified borrowers, those with high credit scores (740 and higher), who do not have available funds for a sizeable down payment.
Want to learn more? Contact us today and we’ll have our preferred partners at Caliber Home Loans provide you with the details!
Thanks for sharing Ben! This is great news and I can see this being really helpful for clients of mine looking to purchase a condo in Leavenworth or at Kahler Glen as a vacation home.
Anyone else think that 3% down is kind of scary? I’d be as happy as the next guy to hear that real estate has stabilized, but not if it involves questionably-qualified buyers
@Zander – I agree with that. For this particular program, it’ll really only benefit well-qualified buyers with great credit & income, but not much saved for a down payment. Even in the $200,000 price example above, a buyer would probably need at least $13,000 to close (down payment, upfront MI & closing costs). For credit scores under 740, the fees and rates go up quite a bit. It’ll likely price out questionably qualified buyers.
I was able to purchase my first condo last April because of the hard work that Cobalt did for me. My girlfriend and I are self employed and John Barlow from Cobalt Mortgage worked his ass off for us. His team made us feel very well taken care of and even ended up absorbing a few costs for us when we ran a few days over our escrow time period.