Cheryl Knowlton: Hi, everybody. Cheryl Knowlton, Clay Johnson coming at you for episode four of Down Payment Assistance. So we’ve talked about some of the neat programs that are out there. There are some low down payment programs that are really unique.
Clay Johnson: There are. And for the longest time, we always talked about conventional financing. We always do FHA. It’s been the same for a long time, 3 1/2% down. But when we looked at conventional financing… And there’s some real advantages there because you can drop the mortgage insurance. You can no longer do that on an FHA loan.
Cheryl Knowlton: Oh, I know.
Clay Johnson: I know. So this is really cool. A few years ago, Fannie Mae and Freddie Mac came out with a 3% down program. Now here is the part that was really exciting about this, the FHA has been the only one that’s allowed forever, is that the down payment, that 3% can 100% be gifted to them.
Cheryl Knowlton: Whoa.
Clay Johnson: I know. So it’s been-
Cheryl Knowlton: That used to be a huge advantage for FHA.
Clay Johnson: Exactly. You always had to have at least 2 to 3%, depending on the year, of your own funds for a conventional loan. No longer the case. Here’s what I love about it though. They had put some protections in place for those lower FICO folks, that they cap what’s called the loan level price adjusters, that make your interest rate go up.
So it protects that interest rate to keep it low, but they also said, “We’re going to give them reduced mortgage insurance.” So their monthly mortgage insurance ends up being about two-thirds what it would be on a regular conventional loan and lower than an FHA loan.
Cheryl Knowlton: Whoa.
Clay Johnson: And so this is a [crosstalk 00:01:19] that we’re looking a lot of times now. And it’s just 3% down. 100% of that can be gifted.
Cheryl Knowlton: That is really, really cool.
Clay Johnson: It is.
Cheryl Knowlton: Wow.
Clay Johnson: Yeah, we’re loving that one. And the great thing about it, too, is we can actually do the no closing costs loans associated with that too, because there’s some rebate pricing, with just a little bit higher interest rate. We can cover the closing costs if we need to as well. I love that about the FHA and that program.
Cheryl Knowlton: Absolutely. Again, sweetening the offer for the buyer so that they’re more competitive in a very, very highly competitive environment with multiple offers. So a couple of really great ideas for you, and we will see you in the next episode.
Clay Johnson: See you.