New 3% Down-Payment Loan!

Coming soon to a lender near you–a 3% down-payment conventional loan!

These two new Fannie Mae/Freddie Mac programs are designed to help crediNew 3% down-payment loan programt-worthy borrowers, particularly those with low or moderate incomes. They need to demonstrate the ability to repay a mortgage, but lack the money needed for at least a 5% down payment. The loans would be allowed only for fixed-rate mortgages on single-family homes. They would also need to be the borrower’s primary residence and would require full documentation of the ability to repay the mortgage.

Freddie Mac’s program is called Home Possible Advantage, and is open to anyone who meets certain requirements. First-time home buyers must participate in a home ownership education and counseling program. It is available to those who would like to refinance their loan as well. All participants will have to pay for private mortgage insurance (PMI), in addition to the mortgage payment.

The new loans will only granted to those who buy private mortgage insurance, have a credit score of at least 620, and offer full documentation of their income, their assets, and job status. Fannie Mae will start backing the loans as soon as December 13, while Freddie Mac will start offering them March 23.

3% down mortgage loanBefore this new program, a 5% down-payment was fairly standard for most lenders in California. A 5% down-payment  means coming up with about $22,500 to buy a median priced house of about $450K in San Diego, whereas 3% down is closer to $13,500.

There are some down payment assistance programs but most home buyers will need some cash to buy a home. People who already own a home often use the proceeds from the sale of that home for a down payment.

For those who are planning on buying that first home in 2015 now is a great time to start shopping for a mortgage!


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