Contrary to the lending practices of the past few years, an increasing number of banks are now offering loans with just 5% down. Bank of America, Wells Fargo, and TD Bank are among the banks offering these low down-payment mortgage loans.
TD Bank is offering a “Right Step” loan product that allows borrowers to secure a loan with a 5 percent down payment while also allowing borrowers to get up to 2 % of the sales price as a gift from a relative or third party. In actuality a borrower would only need to supply their own funds equal to 3% of the sales price to have a sufficient down payment for a mortgage loan.
To qualify for a 5% mortgage loan, however, home purchasers are required to purchase private mortgage insurance and the PMI must remain in place until they build up 20% equity in the home.
Source: “Banks Offering Mortgages with Only 5% Down Payments,” CNNMoney (Nov. 5, 2013)