FHA or BofA 3% down w/ no PMI?

Question

I am looking into house hacking a duplex. Originally, I was going to use a FHA loan. Most recently, I have found out about the Bank of America loan. This loan requires only 3% with no PMI. Since there is no PMI, I assume the interest rate will be much higher. Has anyone had experience with this type of bank of america loan? Which loan would you recommend for a house hack?

Account Closed · Answer

@London Stewart The big pro for a house hacker is that you wouldn't be using your FHA loan so when you get your own house down the road or want to house hack again you can still most likely get and FHA and get the 6% sellers concession if you want it.  This is very helpful if you get and expensive home for yourself and don't want a ton of out of pocket.  the affordable home solution loan concessions is lower I think its around 3%or maybe even 2% .  are you familiar with sellers concession?

Steve Babiak · Answer

"Seller concession" is sometimes referred to as "seller assist", and maybe you are more familiar with that term.

Jeff Bridges · Answer

Whenever I see a loan product that offers no PMI or maybe a city subsidized loan program with lower than normal down-payment for first-time homeowners, the net result is usually a higher interest rate to account for higher risk of program. So if you were to consider getting prequalified, be sure to compare with another lender or 2 and their regular loan products so you can know the premium you would be paying in terms of interest rate and loan fees to obtain such a loan and see if that has value to you. When homepath was offering 5% down loans with no PMI (now discontinued) that I took advantage of, I knew I was paying a higher interest rate maybe a quarter of a point of interest, but definitely appreciated not having PMI in addition to the loan P&I.

London Stewart · Answer

It's called Affordable Loan Solutions mortgage. Here is the link: https://www.bankofamerica.com/mortgage/affordable-loan-solution-mortgage/ . I am still trying to figure out the specifics.

Wayne Brooks · Answer

Not familiar with conventional 3% down, no PMI......perhaps it is "prepaid PMI", where they add the fee to your loan balance or raise the rate to pay for it out of the spread premium?

Russell Brazil · Answer

Im familiar with the Fannie Mae Home Ready loan, which is likely the 3% down loan you are looking at, but it requires PMI. Now it does not have permanent PMI attached to it like an FHA loan does, but you still have to pay it till you hit 20% equity in the property.

London Stewart · Answer

Nice. I will have to look more into this. So are you recommending the FHA loan over the BofA 3% down w/ no PMI because of this?

London Stewart · Answer

Hi Bryant,

I am not familiar with sellers concession? Can you elaborate more about it?

FHA or BofA 3% down w/ no PMI?

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