3 percent down with no PMI? Is this possible?

Asked by Joe, 27612 Sun Dec 2, 2012

Wondering what kind of options are out there for low down payment / no PMI loans for non first time homebuyers in the Raleigh area.

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, ,
Mon Dec 3, 2012

As has already been mentioned, VA is the only option available that offers a loan without mortgage insurance when putting less than 20% down.

What is available is various options on conventional loans to address private mortgage insurance but you're still paying it one way or another.

For example:

LPMI or lender paid PMI - is an option where the lender pays the PMI but in order to do that, the lender charges you a higher interest rate to cover it. The down side to this option (in my humble opinion) is that your rate is never going to go down unless you spend thousands of dollars to refinance it where as eventually the PMI will drop off at no cost to you.

Split premium PMI - This option is set up like FHA where you pay a portion of the PMI upfront and that reduces the amount you pay monthly. Overall not a bad option.

MCM - The my community mortgage program offers reduced down payment requirements and reduced monthly mortgage insurance. This one is for first time home buyers so if you've owned a home in the last 3 years you wouldn't be eligible. There are a couple of additional down sides with this one. The program has income limits like the USDA program but you're not limited to rural properties like USDA. The other issue is the LLPAs or loan level price adjusters can be on the high side which will push your interest rate up.

USDA is great option for a number of reasons. You do not have to be a first time buyer to qualify but it does have county income limits and the home has to be located in an eligible area.

One of the best things about this mortgage is the monthly mortgage insurance is substantially less than an FHA or conventional mortgage and that's with no money down.

Here's an example: An FHA mortgage of $155,000 is going to have a monthly mortgage insurance payment of $161.45 but on a USDA mortgage it's only going to add $51.66 to your monthly payment.

The other nice thing is you can actually roll your closing costs into the loan as long as the appraised value supports it.

Please feel free to contact me for more information or help. You can also find info on my USDA Mortgage website by clicking the link below.

John Burke
Senior Mortgage Banker
Peoples Bank & Trust
1 vote
Beverly Hein…, , Raleigh, NC
Thu Dec 6, 2012
BB&T Bank also has a first time homebuyer loan with no mortgage insurance. The interest rate is a little bit higher but the net result is still considerably less per month then it would be paying mortgage insurance. I believe the program is called the CHIP program. Give me a call at 919-961-5487 if you have any additional questions. I am happy to answer them for you.
0 votes
Daniel Harmon, , Raleigh, NC
Tue Dec 4, 2012
Actually this is possible through NC housing and if the property is located within a USDA elible area.

Jim Allen Group
Coldwell Banker HPW
0 votes
Marge Bennett, Agent, Fort Myers, FL
Sun Dec 2, 2012
Think PNC bank has this type of loan.
0 votes
, ,
Sun Dec 2, 2012
yes...if you have a VA Loan and are eligible.

no...the risk of default and foreclosure must be mitigated.

yes....if you have LPMI (Lender Paid MI) and accept a higher interest rate that has the MI built into the rate forever.

USDA RD loans have a .4% monthly fee that is assesed in conjunction with its RD fee to insure against the risk of default. While it may not be called MI it works as such. Property and income must be eligible. The USDA website is below...

0 votes
Ernie Behrle, Agent, Raleigh, NC
Sun Dec 2, 2012
My understanding is that both USDA and VA loans have no PMI and both of these have 100% Financing. Both though have restrictions in that VA loans, unless assumed, are only availble for current and ex military. USDA homes are typically more rural and addresses have to be checked in their website for eligibility. I just completed listing a home this morning in Wendell that is USDA compliant. I would strongly suggest contacting a qualified lender personally with this question if an answer is needed quickly. May I recommend Natalya Hill at 919-614-0388 . I've been working almost exclusively with her since 1994 and she has never failed to get a loan through that she said would work. Also, if looking at homes, please feel free to use the search engine on my website at http://www.RaleighHomeSite.com.
0 votes
Monica Mendez, Agent, Zebulon, NC
Sun Dec 2, 2012
I have not found a lender who will lend with not PMI with less than 20 % down payment.
The risk of default goes higher with low down payment loans. The bank has to be sure someone will pay if this happens.
If tou find an institution doing it I would like to have their information.
0 votes
Daniel Harmon, , Raleigh, NC
Sun Dec 2, 2012
It is possible with USDA and with NC Housing, depending on the location.
0 votes
Michael Colv…, Agent,
Sun Dec 2, 2012
It just depends best to speak with a few lenders, I will be happy to recomend for you.
I have a buyer on new construction with a 3.5% down payment and no pmi closing this month, but keep in mind usually there are other ways for the lender to make money, ie slightly higher fees and or interest rates. Local banks sometimes have very unique programs depending on the area, and or occupation etc.
0 votes
Tim Burrell, Agent, Raleigh, NC
Sun Dec 2, 2012
No. Any time there is a small down payment, there is mortgage insurance in there somewhere. Even if the lender does not have you directly pay for mortgage insurnace, the lender will get the mortgage insurance and include it in the price of the financing. Without the insurance, the risk is too high, as there is an a much higher rate of default on low down payment financing. If you need an agent who will always "tell it like it is" see http://www.TeamForYOUrDreams.com
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Sun Dec 2, 2012

I've not heard of any loans that aren't going to require PMI with so little down, other than through State Employees Credit Union which if you have access to using would be who I would suggest speaking with. Even they may require some sort of PMI.

Good luck, I'll be interested in seeing what some local lenders have to say in their response. Might be I'll learn something new and useful.
0 votes
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