5% Down Conventional Mortgages Lately?

[Anonymous]

Has anyone obtained or seen a 5% down conventional loan lately?

Our scores are high (greater than 775) with no negatives, and the front-end DTI should be ~35%, and the back-end DTI will be 35.5% (we have almost no debt). We'll have ~ 3-4 months of cash in reserves, and ~ $200K in vested retirement accounts.

I am just wondering if a 5% down conventional loan under these circumstances is a dream.

[203bravo]

I'm getting a 3% conventional loan.. so you should have no issue with a 5%.

[Anonymous]

Ditto.  I just closed on a 3% conv loan this morning.

Might just depend on the financial situation for your lender.  You might need to shop around a bit.

[CS800]

Nice, I didn't think 3% conv existed. That beats FHA by 0.5%

What kind of scores are we tallking about for this type of loan?

[203bravo]

there is also no up front funding fee and when FHA starts the monthly funding charge for their loans,, it will make this even a better product.

I was told you needed at least a 720 - 740 score to qualify.

[Anonymous]

Out of curiosity, are you using a major lender?

[Anonymous]

Not all banks have the 3% as an option; only my credit union offered it.  Scores had to be minimum of 740, and standard DTI ratios (28/36) applied.  

It pays to look around at different local lenders.

Another thing to consider if you really need to buy now and can't save up a sizable downpayment is a special first time homebuyers program from your lender.  These tend to have rates a bit higher, and they may bundle the private mortgage insurance in with the loan financing.  

If your income doesn't exceed limits, other programs may be available for first time home buyers in your county or state.

[203bravo]

I'm also using a local bank

[ShanetheMortgageMan]

Anything less than 20% down requires private mortgage insurance (PMI), so when you get over 80% LTV on a Fannie Mae or Freddie Mac mortgage the PMI providers primarily dicate the guidelines.  Right now the lowest score that is needed for 5% down is a 620, and only one PMI provider insures that, all the rest require at least a 660 up to even a 700.  With 3% down just a 680 score is needed, but again only one PMI provider insures that, all the rest require 720 or 740 scores.  All PMI providers are OK with debt ratios up to 41%, up to 45% can qualify in certain situations (usually 740 to 97% or a 720 to 95%) and again there is even a PMI provider who will insure debt ratios whatever Fannie Mae (up to 49.99%) or Freddie Mac (up to 54.99%) would approve via automated underwriting.  

So a good rule of thumb right now is for 5% down on conforming you should have a 700 score and a 41% DTI.  Higher than that can qualify, but if you don't want to be looking for the needle in the haystack lender that guideline will do you well.

[liz2011]

When you talk about DTI ratios, do you mean the amount of total debt including the mortgage that you have to pay monthly, as related to your monthly income after taxes?  Does this take into account minimum payments only?  I had no idea 3% and 5% conventional loans were available.