The traditional purchase home loan program in California is the Conventional program with Fannie Mae or Freddie Mac.

Many homebuyers think you have to put down 20% of the purchase price to buy a primary home to avoid mortgage insurance. I am here to say that is not true, you can purchase a home in California with as little as 5% down utilizing the Conventional home loan program, the best part this program also has options that allow you not to have mortgage insurance even with 5% down payment.

The conventional purchase program allots homebuyers the option to put as little as 5% down up to 95% down. Allows the option for the borrower to have monthly mortgage insurance or not to have, allows the option to escrow the property taxes and homeowners insurance in the mortgage payment or not and does not require to run credit on a non-borrower spouse. If the spouse has less than perfect credit, we do not have to run their credit report unlike the FHA program requires to run credit on the spouse even if they are not applying for the loan.  

With this program like every other home loan program there are pros and cons associated with a conventional loan, such as:

     Pros: Cons:
Allows as little as 5% down Requires higher credit scores than other loan programs
Stable loan program               Longer wait time with a previous Foreclosure or Bankruptcy 
Does not require Mortgage Insurance Interest Rate Based on several factors
Non-Borrowering Spouse credit not a factor       May require more money down
Fix and Adjustable Rate Option   
10, 15, 20 and 30 year terms
No Pre-pay penalty
Purchase a home 2 years after a short sale
Monthly Mortgage Insurance premium is lower
Mortgage insurance will drop off a lot faster

The Conventional home loan program is a great option for every home buyer, that is why when purchasing a home you need to explore all your loan options. That is why it is key to work with a mortgage professional who is knowledgeable with all traditional loan programs. With a 5% down payment option this may open more opportunities to purchase a home at a slightly higher price point than an FHA home loan. 

If you elect to have mortgage insurance in the payment, the premium is less than the FHA premium. The mortgage insurance with conventional is based on the middle credit score that the homebuyer(s) has at the time of purchase. The 2 ways to avoid mortgage insurance on the conventional purchase program with 5% down payment, raise the rate to cover the cost of the premium or buy out the premium with out of pocket funds. These 2 options may be benefit verse paying a monthly premium, that is where your experience loan officer should present all 3 options to see which one works in your budget.

When purchasing a home start with the loan process to ensure you can qualify to purchase a home and look at the Conventional home loan program to see if the option is right for you. You know your budget on what you want to spend each month on your mortgage payment, stick to that budget because the last thing you want is work for a mortgage payment each month. Buying a home should be an exciting time and having a game plan when starting your home buying process will solidify your decision to purchase a home.

I welcome the opportunity to be a part of your home buying experience, call me today at 909-503-5600 and lets discuss your plans of homeownership. Weather this is your first time being a home or second and third time around, lending guidelines change constantly in the mortgage industry, that is why it is imperative you speak with a loan officer with a proven history of assisting homebuyers become homeowners in a smooth and stress free manner.

Please complete the short contact informational form below, so we can discuss the dream of homeownership with a Conventional home loan program.