FANNIE MAE HOME LOANS

CONVENTIONAL LOAN

LOW DOWN PAYMENT

FNMA 3% Down Payment Conventional Mortgages

It was great news when Fannie Mae (FNMA) announced in 2014, that they were introducing a 97 percent Loan-To-Value option for first-time home buyers to finance their purchase.

The BETTER News: They have since expanded the program to include repeat buyers, so it will help MORE people become eligible for home loans!  

 Mortgage Application | Jimatthetop | Jim Pedicord | RE/MAX Top Realty Houston

Fannie Mae continues to develop ways to advance the availability of low-down-payment loans in an effort to help more people qualify for a mortgage. A recent program added to Fannie Mae’s repertoire will help potential buyers overcome two of the most common obstacles to home ownership, low savings and a modest income.

The HomeReady Mortgage

To address many buyers' struggles to save the down payment, Fannie Mae developed the HomeReady mortgage program. The program provides 97 percent financing (or 3% down, looking at it another way) on a fixed-rate mortgage. The intent was initially to provide access to credit for qualified first-time homebuyers who may not have the resources for a larger down payment. They have since expanded the program to include repeat buyers and have relaxed a number of the requirements.

What is great about this program is that it addresses some common financial challenges and has helpful eligibility guidelines, including:


  • Supporting extended families. Income from a household member who is not a borrower (i.e., they won’t be on the mortgage) will be considered. This means in multi-generational households, the income of children, grandparents, other extended family members and non-relatives may help buyers qualify for a HomeReady mortgage.

  • Allowing co-borrower flexibility. All borrowers do not have to reside in the property. For example, parents, who won’t be living in the home, can be co-borrowers on the loan to help their children qualify for a mortgage and purchase a home. Income limits may apply.

  • Accepting additional income sources. Rental payments may be considered as another allowable income source to help qualify a buyer (i.e., rental payments from a basement apartment).

  • Homeownership Education Requirement. Helps buyers prepare for the responsibilities of buying and owning a home. Buyers can complete an online homeownership course to fulfill the requirement. 

Borrowers under either program will need to meet Fannie Mae’s usual eligibility requirements, including underwriting, income documentation and risk management standards. They will require private mortgage insurance or other risk sharing, as is required on purchase loans acquired by the company with greater than 80 percent Loan-To-Value ratios.

Eligibility for the program is based on income limits Fannie Mae has assigned to a geographic area, by US Census tract. Some areas have no income limit.

Borrowers will also need to meet the participating lender’s usual eligibility requirements, including underwriting, income documentation and risk management standards. Private mortgage insurance is required on these loans similar to other mortgages with greater than 80 percent Loan-To-Value ratios.

Something to note, unlike the FHA’s low-down-payment loans with fixed mortgage insurance fees, conventional mortgage insurance providers’ fees are determined by individual companies and according to the credit score of the borrowers.  A borrower with a good credit score will be charged less than a borrower with a marginal credit score.

Another big difference is that mortgage insurance on conventional loans can be cancelled when the equity in the property exceeds 20% whereas FHA mortgage insurance in most cases is paid for the life of the mortgage.  The long term cost for an FHA loan could be substantial unless you refinance with a conventional loan later.


Fannie Mae | Jimatthetop | Jim Pedicord | RE/MAX Top Realty Houston

Fannie Mae is committed to helping homebuyers purchase and remain in their homes. They work with mortgage companies (i.e., mortgage lenders and servicers) and housing counselors to help people become homeowners as well as current homeowners who may be experiencing hardships. They have developed a number of programs and options that are intended to address a variety of situations and circumstances impacting current or future homeowners with new loans or refinance.


 

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 Want to become a homeowner?

 

Contact me to find out if you can qualify for this or other low-down-payment loan programs.

 

You may be closer to your own home  than you think!

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James Pedicord
James Pedicord
Realtor