We have gotten the investor’s details on this new program. Everything looks great and there is some good news in there about credit scores. The only item I need to revise is that the banks are capping out financing at 95% not 97%. But at 95% financing, there is still no PMI and no appraisal. The good news is that the minimum credit score for 95% financing is 660 so this could serve as a great alternative to FHA. Without the more expensive upfront PMI and the monthly PMI that FHA or conventional has, this will be a great program if a property meets your buyer’s wish list.

The other great option is for the buyers who are investors. Currently you are limited to a maximum of 4 financed properties including your primary residence. With this program, you can have up to 10 financed properties. I attached the matrix for these. If you own 4 or less financed properties, you can actually finance up to 90% of the price. No PMI either.

The attached matrix may be more technical than you may want or need to see but thought it could be of help as it goes into all aspects of this program.

Regarding rates, using an example of a purchase of a primary residence with a sales price of 200k with 5% down and a credit score of 675, the rate would be 5.125% for a 30 year fixed with no PMI. As you can see, very good. Currently, borrowers could not even get a conventional loan with less than 20% down and scores less than 720 due to not being able to get PMI.

Spring is here  and hopefully it continues to bring rejuvenation and some freshness into our markets in the weeks ahead. Rates have remained very low amongst all products and the other programs such as VA and USDA are still going strong as well.  I was looking at alternative solutions which could help liven some things up and came across something interesting with one of the banks.  Lender paid PMI isn’t anything new as it has been around for a long time but has gotten pushed back in the eyes of most lenders since they weren’t pushing it due to the PMI companies not emphasizing it. Lender paid PMI can help expand what customers can qualify for due to lower overall payments. For those not familiar with the way lender paid PMI works, it simply means that instead of the consumer paying it on a monthly basis, the bank pays on their behalf at the trade off for a higher rate.

For example, a 300k loan with 10% down, 4.75% interest rate for a 30 year fixed and a 740 credit score would normally have a payment of   $1565 for P&I plus PMI of about $190. This equals $1755.

If you use the lender paid PMI program, the rate would go to 5.25% but the payment is $1656 for P&I. However, there is no add on for PMI since it is built into the rate. This makes the payment lower by just under $100 per month.  You can do this with 5% down or 15% down as well. The 5% down loans would be .75% higher than the normal rate so 5.50% instead of 4.75% OR 15% down only increases the loan by .375%. It works best for relatively larger loans with smaller down payments such as 5 or 10% down since the PMI is much more expensive in these scenarios.

This is just one way of hopefully expanding the qualifications for potential buyers thus creating more opportunity for both your buyers and sellers.