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Banks Now Offering 3% Down Payment Loan

3% down home loan

Many Banks Now Offering 3% Down Payment Loan

Many banks are now starting to offer 3% down payment loans instead of FHA loans.  At one time FHA loans were geared towards cash-strapped and credit challenged borrowers.  Many banking institutions feel that FHA loans are too risky, and penalties by the government can be high if they make a mistake.  There have been a few cases where the government has taken legal action against some of the largest banks due to loan origination practices and violations.  I think offering a competitive product is a very smart move to not shutout low down payment borrowers.  FHA loans typically account for 30-40% of all loans originated. That’s a lot of borrowers.

Here are some examples of newly launched loan programs:

  • JP Morgan Chase – “Standard Agency 97%” Program – This loan product is geared towards first-time homebuyers and requires a minimum FICO score of 680.  Another option would be the “DreaMaker Mortgage” which allows for a 5% down payment, flexible funding for closing costs, and reduced requirements for mortgage insurance.  The FHA requires Private Mortgage Insurance for the life of the loan, a big challenge for many.
  • Wells Fargo – “Your First Mortgage” Program” – Requires a minimum down payment of 3%, a minimum FICO score of 620 for a conventional loan up to $417,000.  Your down payment can be gifted with the proper documentation and those that complete a home buyer education course can earn a 1/8 interest rate reduction.  The course isn’t required, but I recommend it to anyone that feels lost in the sauce when it comes to a mortgage.
  • Bank Of America – A minimum of 3% down and doesn’t require mortgage insurance.

These programs are just the beginning of a growing trend.  If you are working with a mortgage broker, have them inquire about these programs on your behalf.  Always ask questions and most important, know what you are getting!




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