Low Down Payment Loan Options
The availability of low down payment loan options in San Diego has increased over the last few years, compared to right after the financial crises of 2008. Many home buyers do not have a 20% down payment and are looking for other options to be able to purchase a home in San Diego with a low down payment.
This article focuses on a variety of low down payment loan options in San Diego. As a San Diego Mortgage Broker, we have access to all these options and more. By using one of these options, you can get over the hurdle of a high down payment on your home purchase.
San Diego Conventional Loans with Mortgage Insurance – 97% Financing
Low down payment loan options in San Diego include conventional loans with mortgage insurance. A down payment as low as 3% is available on conventional loans up to the San Diego conforming loan limit of $510,400 for purchases. At a 97% loan to value mortgage, you would have to have private mortgage insurance to offset the risk of the low down payment. This insurance helps cover the lender against losses should you default on your mortgage.
The cost of the mortgage insurance is dependent on several factors like credit scores, loan term, and loan to value. A rate is calculated based on those factors which is then multiplied by the loan amount to determine the monthly mortgage insurance payment.
For example, if you would like to obtain a San Diego purchase loan of $400,000 with 3% down payment you would need to have a credit score of 700 and a debt to income ratio below 45%. The rate would be .88% or $293.33 a month.
San Diego conventional loans with low down payments of 5% and 10% are available as well. The mortgage insurance rate and payment would be lower with larger down payments.
If your loan amount is above the San Diego conforming loan limit of $510,400, but below $701,500 which is the San Diego High Balance Loan limit, you can obtain a low down payment loan in San Diego of 90% loan to value.
The mortgage insurance can be removed once the loan to value has been lowered to 80%.
San Diego FHA Loans – 96.5% Financing
Another way to obtain a low down payment loan in San Diego is through an FHA Loan. This is a government program to help home buyers. With a San Diego FHA loan, you can take out a mortgage with a down payment as low as 3.5%. In addition, the down payment can all come as a gift, so your family can help you buy your home.
You can qualify for this loan with a higher debt to income ratio and a lower credit score than traditional mortgages (you may qualify with a credit score as low as 620). This makes it an ideal program for first time home buyers.
The downside of a San Diego FHA loan compared to a conventional loan with MI is that it has higher mortgage insurance costs. FHA loans require an upfront mortgage insurance premium of 1.75% of your loan amount. This can be financed into the loan or paid in cash at closing.
In addition, you will have an annual mortgage insurance premium, which is paid on a monthly basis. That rate is dependent on the loan term and loan to value, but for a 30 year fixed 96.5% loan amount it will be 1.25%.
The FHA mortgage insurance can also last longer than conventional MI. While the mortgage insurance on a conventional loan can be removed at 80% loan to value, an FHA loan requires mortgage insurance until you are at 78% of the original loan balance or a minimum of 5 years.
To Learn more about FHA loans click HERE.
San Diego VA Loans – 100% Financing
If you are an active member of the military, a veteran, a Reservist or National Guard member, or a surviving spouse, you may be able to qualify for a low down payment loan in San Diego through the VA.
As of January 2020 you can get a San Diego VA loan up to $2,000,000 and not have to make a down payment. If you want to take out a larger loan, each lender will have their own calculation of determining the minimum down payment.
These loans are guaranteed by the VA so you don’t need to pay for mortgage insurance, a huge cost saving. To qualify for these loans, you need to have decent credit. You also need to show proof of employment for the past 2 years so the VA can verify that you can afford your mortgage payments plus seem likely to keep your job going forward.
To learn more about VA Loans click HERE.
San Diego Jumbo Loans with a CLTV of 89.99%
If you are looking for a San Diego Jumbo Loan with a low down payment and no mortgage insurance, this loan program is for you.
We can combine a San Diego Jumbo Loan and an equity line second up to a $750,000 loan amount at an 89.99% CLTV with a 700 Fico score. Or if you have a higher purchase price, we can go to a combined loan amount of $1,000,000 at an 85% CLTV with a Fico score of 720.
The first mortgage can be a 30 Year fixed San Diego Jumbo Loan or a 5/1, 7/1, or 10/1 ARM.
The second is an equity line with a 10 year interest only period and then a 20 year repayment term. The rate is Prime + 1.99% or currently 5.24%. The equity line limits are a minimum of $10,000 up to a maximum of $350,000. Most other San Diego Mortgage Brokers don’t offer this option making this is a unique program offered through The Mortgage Planners.
Anyone of these options can help you get over the hurdle of a large down payment. Since each option has its own advantages and disadvantages, it’s hard to say which one is best for you. That is why we offer a free pre-purchase consultation with a qualified San Diego mortgage broker will help you better understand these options and guide you towards a low down payment San Diego loan.
Please contact me at 858-829-7186 or request a interest rate quote by filling out the short form on the top right sidebar.