Smaller loans, smaller payments and No PMI
If you’re right on the edge of being able to buy the home you want, newly available low down payment loans may not get you any closer. REX HomeBuyer might.
Low-down payment loans may help you clear the down payment hurdle, but may make it harder to qualify for the monthly payment. First, less money down means a higher loan balance with higher monthly payments. Second, putting down less than 20% likely means paying private mortgage insurance (PMI). Added up, the higher payment and PMI premium mean that a house that was affordable with a 20% down payment may be out of reach if you put down less.
A typical example: the median home price in California is around $400,000 and the median household income is around $68,000. With 20% down, that income just barely qualifies for the housing payment on home at current interest rates. If the buyer puts down less, however, the economics no longer work. Putting down 10% and borrowing 90% instead of 80% results in a significantly larger monthly payment, and a monthly PMI premium on top of that. Altogether the buyer would need a 17% larger income to support the payments. The same holds true for home purchases requiring a jumbo loan.
Equity down payment funding with REX HomeBuyer solves the problem. The REX Homebuyer program will match your 10% cash investment with another 10%, getting you to a 20% down payment. You only need a mortgage for 80% of the home’s price. And there is no PMI premium to pay.
The money from FirstREX is an equity investment, so there’s no interest or monthly payments on that amount. Instead, you share with FirstREX part of the change in value of your home, up or down, when you eventually sell, up to 30 years later. FirstREX is essentially co-investing with you with the expectation that your home’s value will appreciate, and sharing the risk with you that the value will not.
If you’re a buyer unsure of qualifying for a loan, the combination of the 10% down payment, the smaller monthly payment, and no PMI may make the difference between getting the home you really want or settling for less. REX HomeBuyer is available with loans from participating lenders in California, Oregon, Washington, Maryland, Virginia and DC.