97% Conventional Loan Options

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As we head into 2018 and continue to be in what we would probably all agree to be a seller’s market, understanding the various lending options plays a key role in getting contracts accepted for your buyers. 

For whatever various reasons that might exist, it seems that sellers are much more inclined to accept offers when the buyer’s financing is with a conventional loan versus an FHA loan.  And while I believe that FHA serves a critical role in home finance (many clients, particularly those with lower credit scores are better served with an FHA loan), there is a very distinct benefit for buyers using conventional loans to make their home purchase – and it’s not just in getting the seller to accept the contract.

There are basically two types of 97% conventional loans: the standard 97% scenario and the Home Ready (HR) option.  To qualify for the standard 97% program, at least one of the buyers must be a first time homebuyer – but there is no income limit.  The buyer doesn’t have to be a first time buyer to qualify for the HR program (although they can’t own any other property at time of purchase), but there is an income limit based on property address.  

The main things to remember is that HR offers a discounted interest rate and mortgage insurance (MI) is cheaper than the standard 97% program.  In many cases, particularly when the buyer has a good credit score, the HR program is better than FHA (less down payment and cheaper MI).  So not only does this type of financing work better for the buyer, because it is a conventional loan, the contract offer is more readily acceptable from the beginning.

Here are the statistics.

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Borrower benefits

  • Down payments as low as 3%
  • Competitive pricing meets or beats our standard loan pricing
  • Flexible sources of funds with no minimum contribution requirement from borrower’s own funds (1-unit properties)
  • Rental and boarder income may be considered for qualifying
  • Others who don't live in the home can join buyer on the mortgage
  • Cancellable private mortgage insurance per Servicing Guide policy
  • Reduced MI coverage requirements for LTVs above 90% (up to 97%)
  • Homeownership education and housing counseling options empower borrowers to become successful homeowners

I’m happy to discuss any specific questions you may have regarding this, so feel free to call. Be sure to check out the following  links for further information. 

HomeReady Fast Facts  |  Income Eligibility Look-up Tool  |  FAQs