Non-FHA 3% Down! Anyone heard of this?

Question

Hello Everyone,

I was just offered a conventional 30 year fixed mortgage with 3% down at a 5.25% interest rate and NO PMI? This seems like an amazing deal and maybe too good to be true, has anyone ever heard of something like this?

Thank you,

Jordan

Jordan B. · Answer

@Aaron Klatt Thank you for the response! I will look into it. The kicker is, this is for a 2-4unit loan.

Jordan B. · Answer

@Christopher Giannino Yes this is for an OO loan and that is exactly what they did. After running the numbers it would still be better to do the higher interest rate than the PMI. Plus there is the added benefit of not having any of the red tape that accompanies an FHA loan.

Christopher Giannino · Answer

@Jordan Bochner

Is this an owner occupant loan?  I'm just wondering maybe the PMI expense is built into the interest rate?  Reason why I say that is because I just closed on refinance for an OO loan and my interest rate is 4.625.  If this is a local bank, maybe they intend to keep the loan in-house and so they inflated the interest rate in order to allow for no PMI.

Nathan Rude · Answer

@Jordan Bochner I know a few local credit unions will do 3%-5% with PMI for owner occupied single families. I don't think they allow multifamilies though.

Brian Garrett · Answer

I've never heard of anything like that.  I've heard of 5% conventional non-FHA.

Also as mentioned these are for owner-occupants and not investment properties.

Aaron K. · Answer

I have not, but many localities have programs for residents if your income is low enough, typically I would expect that this would only apply to a primary residence.  I would also double check everything to make sure that your loan amortizes and your interest rate is fixed etc. because yes it does sound too god to be true.