Often the biggest misconception of first-time home-buyers is the down payment. Some think it’s 20%, others think it’s 0%.
Here’s the real deal:
For mortgages $484,350 and below, there are two programs called HomeReady and HomePossible. There are some minor differences between the two programs, but basically, they are the same program.
Eligibility
Both HomeReady and HomePossible enable you to purchase with 3% down IF one of two things are met:
- The property you are looking to buy is in an eligible area.
- Your income is below the average median income limit for that area.
Here’s the thing, most of Oakland is in an eligible area. So you could earn $200,000 a year and still be able to buy with only 3% down.
For loan amounts between $484,350 and $726,525 the minimum down payment on HomeReady and HomePossible is 5% down.
Rates
Through our network of lenders who offer wholesale interest rates, like Quicken Loans, we enable home-buyers to get a much lower interest rate than working directly with the lender.
You can learn why that is here.
PMI
People get concerned about private mortgage insurance (PMI), but the truth is, it’s cheap. For good credit, PMI equates to about 1.5% interest rate on the 17% additional borrowed funds.
That’s why, even if I had the money, I still wouldn’t put 20% down. You can get a higher return than 1.5% with some savings accounts.
And if you don’t want to pay PMI, in return for a slightly higher interest rate, you can have lender pay the PMI.
People just don’t realize. You can buy with 3% down, pay no PMI, and still get a low interest rate on a 30 year fixed term.
Pre-approval
Here’s what really sperates SELFi. In addition to below market rates, your loan application gets pre-approved by an actual human-being underwriter.
Most lenders use an automated system, but the problem with that, is the decision is only as good as the input. And the input is usually managed by sales person or the applicant themselves. This leads to loans being declined even after a pre-qualification letter has been granted.
With a pre-approval through SELFi, you can home shop with confidence. It gives you a leg up in a competitive market.
The downside to getting pre-approved, is it requires more time. Basically, your application is being underwritten as if you were ALREADY in contract. In the end, it saves you time, money, and stress.
To recap
Purchase with 3% down. Below market interest rate. Pay no PMI or a very low monthly premium. Underwritten approval.
3% down could be all it takes