3% Down and No PMI - Good or Bad Sign?

[Bill R.]

Ran across this article on Housing Wire that says that BofA is offering 3% down, no mortgage insurance loans to help buyers get into a home.  Apparently they're conforming loans which means they can be bundled up and securitized which smells a lot like what got the housing market into trouble last time around.  

Granted they're not doing ninja loans or anything but there have been a few articles recently pointing to the fact that home buyers in the $150K - $300K range have less equity in their homes than they did even before the 2008 financial crises.  

Just wanted to throw that out there and hear from of of the old hands regarding what they think this means for the overall housing market.  

My inexperienced take on it is that if so many home buyers can't afford to put 20% down either wages or home prices are out of whack.  

[Chris Mason]

They have PMI, it's just lender paid PMI in exchange for a bumped rate. But that doesn't make for as good a tag line.

These are just vanilla Fannie/Freddie loans with fancy branding. 

Clicking around the FNMA website a while back, I found a little 'marketing' section where they gave me the option to rename Fannie Mae HomeStyle to whatever I want, upload company logo, and poof out comes a PDF flier for my ra-branded FNMA HomeStyle loan with the compliance small print already in place, my contact info, and with a fancy custom product name to create a sense of exclusivity, as well as company logo. 

I did a Rebel Alliance symbol for the company logo and called it the Han Loano, but didn't actually use it for anything. shrug Maybe I just need BofA's marketing resources, so journalists can write advertisements for me and call it "journalism." 

In any case, these Agency 3% down loans are fully underwritten, documented income/assets, the underwriting department calls your employer to ensure you still work there the day before the loan funds, bla bla bla. Nothing shady about them. Fannie/Freddie are just trying to compete with FHA, as well as each other.

Fun Fact: Freddie Mac's FTHB low down payment option will do 2-4 unit. Great way to separate yourself from the ten bazillion people out there trying to do FHA 3.5% down on a 2-4 unit. Yours is obviously no 25% down offer, but it'll show better than FHA shows.