Buyers still think that they need 20% down payment to qualify for conventional loan… Not true. Many lenders these days offer loans for borrowers who put only 5% down. This situation usually involves mortgage insurance, but if your FICO score is 680 or higher there may be possibility of avoiding PMI by paying a one time fee or getting slightly higher interest rate.
5% down may not be an option for everybody. If you dept-to-income ratio is too high you may still qualify for FHA loan with 3.5% down. DTI ratios for FHA loans are more relaxed, qualifying is easier and interest rate is usually lower. Another advantage of FHA financing is the fact that FHA mortgages are assumable (just as VA loans and conventional ARMs after they adjust). For home owners with these loans, assumable mortgage may be a valuable marketing tool if interest market rise. Lenders will still require new buyers to re-qualify for a loan on their own, as they would do with any other mortgage. In addition buyers would be required to replace any equity the seller has in the property.
Let’s assume that home value is $400K and the owners’ current mortgage is $360K. Buyers looking to step into the owners’ mortgage would need to come up with $40K.
Feel free to email me with any questions or if you’d like to get pre-qualified (CA only) – firstname.lastname@example.org