3% Down Payment And No PMI in California

How To Make A 3% Down Payment And Not Pay 

PMI In California


Would you like to buy a home with 3% down with no PMI or MIP mortgage insurance in California? Contrary to popular belief, it can be done, and I wouldn’t even consider it to be creative financing!

In this article I am going to help you understand why you should be interested in this program, how you can qualify, and how the program works.

Why should you be interested in this program?

Simple. It is cheaper than financing with PMI (conventional financing), or MIP (FHA financing), given that the interest rate is the same for both.

For example, FHA financing currently requires upfront MIP of 1.75% of the loan amount, which is added to your loan balance, and monthly MIP of .8% to 1.05% of the loan amount on a 30 year term, which you pay along with your monthly principal and interest. This program has neither!

In addition, you may be able to qualify for a larger loan amount because you do not have these expenses!

There are two ways to qualify for this program:

by income, or by property location. First, there are only certain counties (ten currently) in California that qualify for 3% down. If the property you are interested in purchasing is not in one of these counties, than a 10% down payment is required.

There is a maximum income limit to qualify for the program. This limit changes from county to county. For example, the income limit in San Francisco County is greater than the income limit in Alameda County.

The income limits are higher than what you might expect. In some counties, the income limits are more than $100,000 per year!

The other way to qualify for the program is to purchase a home that is located in a designated census tract. If the home you are interested in purchasing is located in one of the designated census tracts, then there is no maximum income limit! You can make one million dollars per year, and you would be eligible for the program!

The terms of the loan are what I would consider to be very safe. The rate and payments are fixed for thirty years. There is no pre-payment penalty.

The program has some neat features.  Gifts are allowed toward the down payment and closing costs. The primary borrowers are required to put 3% of the purchase price into the escrow that is their own money. Beyond that amount, gifts are allowed. 

You do not have to be a first-time buyer. However, you cannot own any other property at the time of closing. 

The maximum loan amount in some counties is $679,650!


Single family residences, condominiums, and townhomes are allowed. The minimum credit score is 620!

This program is a great alternative to FHA financing! FHA financing still makes sense for some borrowers. However, if you can come up with the 3% down payment this program requires, then this just might be the best alternative!

If you would like to learn more about this program, click here.

Related Post - Get the maps of the eligible tracts in the SF Bay Area


Would you like to talk to Phil - call or text (650) 222-0386

Phil Caulfield NMLS #386911 APMC #1850 has been helping people obtain mortgages since 1985. The views, articles, postings, and information listed at this website are personal and do not necessarily represent the opinion or the position of American Pacific Mortgage Corporation.

Comment balloon 0 commentsPhil Caulfield • November 13 2012 05:25PM