The 3% Mortgage Down Payment is Back

Mortgage Lenders are now letting its borrower put down a minimum of 3% of the house’s selling price on a mortgage. This would break a lot of people’s belief that getting a home mortgage would require at least a 20 percent down payment. Paying at least 20 percent as a down payment would save borrowers from being mandated by the lenders to take out PMI or private mortgage insurance. Since this is a voluntary move from lenders, borrowers are not required to get the PMI which will save people hundreds or even thousands of dollars on your mortgage every year.

This is ideal for homebuyers in states like Louisiana who can’t afford to pay the 20 percent down payment and who would often turn to mortgages assured by the Federal Housing Administration or FHA to have low down payments. However, these so-called low-down-payment mortgages would still require buyers to get the PMI. Going around the Federal Housing Administration’s mortgages is both beneficial to borrowers and the Bank of America. The borrowers in all cities including Lake Charles won’t be required to get the PMI while the FHA will have fewer chances to check for minor errors in loan application which cost the Bank of America to pay at least $800 million back in 2014.

The lender approves the house loans of the borrowers and then endorse them to Self- Help Ventures Fund. The Self- Help Ventures fund will then sell them to Freddie Mac. If in case you become delinquent within the mortgage term, Self- Help Ventures fund will take over the larger proportion of the loss before Freddie Mac has to absorb its loss. In a way, Self- Help Ventures Fund is a great alternative to FHA as the main insurer of the mortgage.

To apply for a mortgage under Bank of America’s latest mortgage program, you must, at least, have a FICO credit score of 660. This is higher than FHA’s required score which is about 580. You should, at least, be below the average yearly income in your area to get your loan approved. First-time homebuyers who will be using the home as their primary residence are the ones qualified for the the lenders program. The borrower should also agree to credit counseling if in case he becomes delinquent. First-time homebuyers are also required to participate in a homebuyer’s education program.

Your interest rate will be based on your financial capacity to pay. However, the Bank of America says that its newest program will be relatively cheaper than the interest rate of FHA.