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by G. Steven Bray
I guess FHFA Director Mel Watt was serious about allowing lower down payments. Fannie Mae announced today it immediately will start buying mortgage loans with down payments as low as 3%. I haven’t heard all the details yet, but let me tell you what I have seen.
First, I don’t know of any lenders yet that are offering the loan program. That may take a couple weeks. And I wouldn’t be surprised to see significant credit overlays to make qualifying a little harder that what I’m going to summarize below. Lenders still are skittish of buy backs and figure homebuyers with little skin in the game are more likely to default.
But let’s assume lenders step up. Fannie says it will accept credit scores as low as 620, but the program is only available to first-time homebuyers, being those who haven’t owned a primary residence in the past 3 years. I understand the program has income limits, but I don’t have details at this time. And, of course, the program requires mortgage insurance, but that shouldn’t be a problem as several PMI companies say they’re willing to insure the loans.
Freddie also has announced it will resurrect a 3% down program, but it won’t start until 3/23. Freddie’s program will be more restrictive. It will limit the program to those who never have owned a home and will require homebuyer counseling. It also may require higher credit scores.
Follow my videos for further details on the programs and for information about lender adoption.