Financing in Pleasanton>Question Details

Long, Home Buyer in 94598

What is mininum down payment for Conventional Mortgage. Let say purchase price $ 850,000 in Pleasanton, CA

Asked by Long, 94598 Mon Aug 17, 2009

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Steve Ornellas’ answer
Hi Long,

I would agree with Brad's 15% down due the MI issue; otherwise, your minimum down would have been 14.15% ($120,250) to stay within conforming-jumbo loan guidelines of $729,750 for (Fannie/Freddie/FHA).

As Shawn points out, FHA is still an option, but your decision should be based on what you believe the housing market will do as you will have to pay Mortgage Insurance for a MINIMUM of 5 years, or until you have paid your original LOAN AMOUNT down to 78% (not that the loan amount is 80% of current market value, which is typical for non-FHA MI removal). This "78% or 5-year Rule" before Mortgage insurance can be terminated is covered here: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi…

Is MI a cost? Sure it is; however, it's also important to know that Mortgage Insurance Premiums are tax deductible on Federal Income Tax Returns. This deduction is for both government and private mortgage insurance premiums. In order to qualify, the mortgage has to have been originated between 2007 and 2010. Originally, it was put in place only for 2007 but an extension was granted as part of the Mortgage Forgiveness Debt Relief Act of 2007. In order to qualify for the full tax deduction, a family's adjusted gross income must be $100,000 or less; there is a partial deduction allowed for families with gross incomes up to $109,000.

There are quite a few benefits of FHA loans. Here is a list of key GENERAL benefits:
1) 3.5% minimum Downpayment.
2) Up to a 6% Seller Credit allowed for buyer's closing costs and Seller concessions (non-FHA max is 3%).
3) FHA requires that identified safety/health issues be corrected.
4) FHA allows up to $8,000 in financed energy efficient upgrades without negatively affecting borrower's debt-to-income ratio.
5) Cash reserves not required.
6) Upfront Mortgage Insurance may be financed.
7) Non-occupying co-borrowers are allowed.
8) High and flexible qualifying ratios.
9) FHA loans are assumable.
10) No pre-payment penalties.
11) Will consider "compensating factors" in determining whether a loan should be granted.
12) Only a minimum credit score of 620 required.

Will's comment about some sellers not accepting FHA offers is true; however, this attitude is based more on distressed sales where the Seller's have "mythconceptions" about what must be repaired as a "Health & Safety" issue. I'm seeing this becoming less of a concern over time (due to increases in supply that are expected into 2010), and this should not be a concern for current non-distressed sales.

Best, Steve
0 votes Thank Flag Link Wed Aug 19, 2009
Long,

Brad is correct for the typical parameters for a Conventional loan.

Also, another more flexible option is an FHA Jumbo loan. Since Pleasanton is in a high cost area you can get a maximum loan amount of $729,750 which is roughly about 14% down. Also, there isn't a requirement to have a 720 or higher FICO since a 620 and higher score give the same rate without any adjustments for credit score. Also, FHA can work with higher debt to income ratio's. And the monthly mortgage insurance premium is lower since its not going through a private company since its a government backed loan. Also, the downpayment funds can come entirely from gift funds. They also allow non-occupant co-borrowers to be on the loan for qualifying purposes. Let me know if you have any additional questions.
0 votes Thank Flag Link Tue Aug 18, 2009
Short answer = 15% down payment. See below for longer answer.

With 15% down, your loan is in the "high balance" loan category (the category between conforming and jumbo--loan amounts from $417,000 to $729,750 in Pleasanton), so assuming you have at least a 720 credit score and at a debt-to-income ratio no higher than 41%, you can get away with 15% down payment, but you'll have mortgage insurance.

10% down isn't available because Pleasanton (and pretty much everywhere) is tagged as a "declining market." With 10% down you'd need mortgage insurance and no MI company will approve a high balance loan in a declining market with less than 15% down.

I hope that helps! Feel free to email me directly if you have any additional questions.
0 votes Thank Flag Link Mon Aug 17, 2009
Long,

20% down= $170,000.
Talk to a direct lender and see what products (mortgages) they have.
Some direct lenders can get you a conventional loan with 10% down.

Shop around for the best rate and downpayment options. Ask for a copy of your credit report that way you can take it to other lenders. That way they don't run your credit multiple times.

You will get better info if you talk to a lender personaly and not go by online mortgage estimates.


Hopes this helps,

Jes Sierra, B.Sc. / Realtor®

http://www.hellomynameisjes.com
0 votes Thank Flag Link Mon Aug 17, 2009
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