3% Down, No PMI Mortgage !?!?

15 Replies

A local credit union in my area (West Michigan) is not only offering, but is advertising on large billboards on the side of the highway a 3% down, no PMI, non FHA mortgage. Am I the only one seeing these types of crazy loans or are there other areas of the country where people are seeing this?

At this time I am not looking to take advantage of a loan like this because I am moving out of state and as a recent college grad have more debt than you can shake a stick at. However I am curious, when my financial situation changes in the next 6-12 months can I use this loan with a local Michigan bank to invest in Denver area, which will be my new home base? 

Would love feedback on what other kind of loans everyone else is seeing out there (Denver area especially) and an answer to if I can use this loan and invest out of state?

PM me if you would like the name of this Credit Union.

Thanks

It's not crazy, but it's not quite an honest advertisement either. 

"No PMI" is actually lender paid PMI with a bumped rate.

It is an option worth exploring, but calling it "No PMI" isn't 100% truthful if you're paying for it every month in your interest rate, or at closing when your discount points to get a normal interest rate are higher.

Just to clarify, this loan would only be available on a SFH and you'd need to live in it. You can not use this as an investment property. You could however buy it, live in it and then later on turn it into an investment property.

I'd personally recommend looking into a multi unit FHA loan. 3.5% down and you'll have any easier time qualifying in your situation (new graduate, high student debt, ect) This will give you the opportunity to use the tenant income from other rented units to qualify for the mortgage. Also, in the long run you'll most likely build more equity and cash flow greater too.

Good luck!

Thank you for the clarification. @Chris Mason @Jared Bouzek . Covering the PMI with a higher interest rate makes sense for the bank and their advertising for sure got my attention

@Matthew Rogers My current plan is to pick up a 2-4 unit with an FHA loan once I have some money set aside and a better understanding of those local neighborhoods in Denver. Thanks for the advice!

Hi I figured I'd chime in. I was approved for a 4% APR with 3% down 30 year mortgage with my credit union. They don't handle FHA 203(k), which is what I'm leaning towards because I think I'd like to rehab a place instead of taking over someone else's older renovations in a multi family.

@Connor Anderson A lot of mortgage brokers offer this product. Like others said, it is lender paid PMI and they increase your annual interest rate in exchange. The monthly payment usually ends up less than you paying PMI. And theoretically mortgage insurance is tax deductable I'm not sure PMI is

@Connor Anderson so if the program is a "local" program which it may or may not be then banks and credit unions don't typically lend out of their service area unless they are just brokering the mortgage. You would need to call and ask the credit union.

Yes, this is a lender paid option and NOT no MI.  If you have good credit there are lenders out there that will gift you 2 of the 3% so you only come to the table with 1%.

I just purchased last property in May 2017 with 10% down, 3.75% APR and no PMI. My lender is not offering that anymore so I'm looking for someone else that offers something similar that I don't have to come up with more than 10% out of pocket. Any leads out there? This is for the Norfolk/Va Beach area.

@Melvin List Hi Melvin, you've caught my curiosity. I'm looking for a first home which I planned to purchase using a 203k. However, if I can find a home for 1% down I would be interested in going that route even without the ability to bundle in renovations. Think that just depends on what shape the home (duplex) is in when I purchase. Do you have any advice on finding these lenders who offer this rate?

Originally posted by @James Shinn :

@Melvin List Hi Melvin, you've caught my curiosity. I'm looking for a first home which I planned to purchase using a 203k. However, if I can find a home for 1% down I would be interested in going that route even without the ability to bundle in renovations. Think that just depends on what shape the home (duplex) is in when I purchase. Do you have any advice on finding these lenders who offer this rate?

It's still just a shell game. If your rate is bumped enough that the loan will sell for 275 basis points more on the secondary market (or it's an ARM, those also sell for more if you hold constant the rate), then giving you a 'grant' for 200 basis points (equals approx 2%) is easily done, and it's still a higher profit loan for the lender.

I think Bank of America got this started. If its the mortgage I think it is, its a newer loan option geared for a specific group of buyers. There are specific requirements to get it but there is always PMI.

I would prefer the single premium (single payment) mortgage.

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