Kelly L. Zitlow

Low Down Payment Options with Conventional Mortgages in Arizona

REMINDER!!!!  The FHA loan limit for Maricopa County, Arizona is set to decrease to $271,050 on October 1^st!  Buyers currently in process who are obtaining a FHA loan at a price point higher than $280,880 and intend on only putting down 3.5%, need to be sure to be in touch with their mortgage lender regarding closing this month. The September 30^th date is crucial! The new maximum purchase price is $280,880 to obtain an FHA loan when using the minimum down payment of 3.5%. Now I know this isn't shocking news for all of you as we have discussed it in previous Arizona mortgage market updates however, I've received many calls and emails asking about low down Conventional mortgage options so I'm focusing today's update on discussing the benefits and availability of Conventional mortgage loans today.

A few key elements of a Conventional Mortgage loan:

• 3% down payment option up to a loan limit of $417,000!
• Credit does not have to be pulled on a disclaiming spouse. FHA loans require the Arizona mortgage lender to pull the disclaiming spouses credit and count obligations in the buyer's debt to income ratio.
• Conventional mortgage loans allow for PMI to be dropped or reduced after being in the loan for 2 years and once the loan to value is 78% or lower. Conventional mortgage loans use an appraisal to determine current market value. FHA loans require the buyer to pay mortgage insurance for a minimum of 5 years and after that point the MIP would only drop off if the principal balance reaches 78% of the original sales price not the current market value. This means, unless the buyer has focused on paying extra toward their principal balance they will likely pay mortgage insurance for roughly 10 years.
• Allows for down payment and closing costs to be gifted by a family member, however, if the down payment is less than 20%, a minimum of 3% must be from the buyer's own funds (mortgage insurance requirement).
• Conventional loans offer a variety of ways mortgage insurance can be paid.
• Interest rates are driven by credit score and loan to value on conventional loans. This isn't the case with FHA loans.

Keep in mind, Mortgage Insurance companies have their own set of guidelines (i.e. fico score requirements, debt to income ratio guidelines & loan to value limitations, property flipping guidelines etc).  That said, it's very important that Arizona mortgage lenders are well versed in both the loan program and mortgage insurance guidelines early in the pre-qualification stage.

A few of the most important Mortgage Insurance Guidelines today:

• 3% down with a 680+ fico, primary residence ~ condos are allowed (must meet Fannie Mae's condo requirements)
• Low, competitive rates for loans with LTV's at 95% and fico scores > 720
• Minimum fico score of 620 for LTV's = 95% (keep in mind mortgage insurance is more expensive with lower credit scores)
• 10% down with a 620+ fico, second home ~ condos are allowed (must meet Fannie Mae's condo requirements)
• Single premium and split premium options available for LTV's = 95%
• Investment property are currently ineligible

There's no doubt mortgage lending in Arizona continues to change at a rapid pace. I'm committed to keeping current with the many changes so you don't have to! Don't hesitate to call or email me with any mortgage questions you have about the FHA loan limit decrease taking effect October 1^st, the 3% down Conventional loan program or any other financing topic you would like to discuss. I look forward to talking with you!

Kelly

Quote of the week: Sometimes we all need to realize that negative thoughts have no power.  
We empower them. ~ Kurt Goad

Earn 3 hours CE of Contract Law at the Residential Financing in Today's Market class I'm teaching on October 11^th.  See www.southwesternschool.com for details.

First Posted 9/2/2011