New: 3% Down Payments for Qualified First-Time Homebuyers

Fannie Mae and Freddie Mac have announced that they are going to start giving qualifying, first-time home buyers loans with just a 3% down payment. The move will make home buying more feasible for more people across the country.

To ensure that those looking to buy are truly qualified, Fannie and Freddie will utilize automated underwriting systems that will scrutinize and assess a borrower’s creditworthiness. What’s more, these new offers come with mandatory counseling for the new homeowners to ensure they are budgeting wisely and can afford the home they wish to purchase. The FHFA will also monitor how these loans are performing.

Named the Home Possible Advantage option, these conventional and affordable mortgages have a maximum loan to value ratio of 97% to only qualified borrowers with low to moderate incomes. Home Possible Advantage mortgages can also be used to do a “no cash out” refinance on an existing mortgage. To limit risk with the loans, Fannie Mae will require income documentation and verify its accuracy.

Also, Fannie Mae will begin offering tools to lenders like their Collateral Underwriter program that helps to evaluate risk on loans. These tools will be available beginning in early 2015 and will be another safeguard to help lenders at no additional charge.

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