Conventional Loan - 5% down payment - How does one qualify?

[Anonymous]

Hello All!

Here's my situation:

I'm married, work full time, wife takes care of kids.

Thinking about apply for a conventional loan without my wife as she has a hefty student loan. 

What are the qualifications for a conventional loan- 5% down payment programs (if they exist)?

[Anonymous]

Not sure if this would help or not but I do reside in CA and would be looking to purchase in CA.

[Heavanly1]

Maybe someone else can chime in but I'm not sure you'll be able to disregard your wife's large student loan payments so easily.

Because she isn't working, my assumption is that you've been making these payments, correct?

Although she may have acquired them before the marriage (and therefore you're not liable for the debt), California is a community property state. That means that any debts and assets acquired during the marriage are considered jointly owned. So even though your wife won't be listed on the mortgage, she's still considered to have some ownership of the home you will purchase. Therefore, in the event that the two of you cannot make those student loan payments, her debtors can come after the home since it's her asset as well.

As a result, when only one spouse is applying for a home loan, some lenders in community property states still count the other spouse's debt when calculating DTI. This could seriously effect how much money you qualify for. I'd recommend that you speak to some lenders in your area about their requirements when one spouse will not be applying for the home loan.

Good luck!

[ShanetheMortgageMan]

With conventional financing, the non-borrowing spouse's debts aren't considered when purchasing in a community property state.  That only applies with FHA, VA & USDA financing.

You can still put 5% down on conventional financing here in California as long as the loan amount will be $417k or less, above $417k loan amounts require 10% down.  Anything less than 20% down in California requires mortgage insurance, as 2nd mortgage lenders aren't willing to go over 80% of the home's value, so the "piggyback" loans of an 80% 1st and the remaining being financed on a 2nd mortgage isn't an option.  When mortgage insurance is required you need to pass the loan programs guidelines as well as the mortgage insurance policy's guidelines, these days often an underwriter from the mortgage insurance company does both, as mortgage insurance guidelines are more restrictive than lending guidelines.  Most of California is considered a declining/restricted market of some sort, so whereas most of the US can qualify with a 660 score up to 95% financing, in California you'll need a 680 or even 720.   Most mortgage insurance providers will permit up to a 45% debt ratio, some cap at 41% or 43%.

[Anonymous]

Thank you Shane for your thorough response!  Much appreciated

[0errant]

Maybe it was just my particular situation, but 5% down on a conventional is going to be difficult to find.

[Anonymous]

I was pre-approved for a 5% down conventional mortgage loan today. I live in MA.

[tray]

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@Anonymous wrote:

I was pre-approved for a 5% down conventional mortgage loan today. I live in MA.

I live in MA also, I read your thread and very interested are you able to share what mortgage company offers the 5% down.  Thanks for any information