Fannie, Freddie taking loans with 3% down again

As I wrote about in an earlier post, things are about to change in the real estate mortgage world. Some say it is not going to have a huge impact, but on those who it does affect, it will have a huge impact. Fannie Mae and Freddie Mac are ready to ramp up purchases and guarantees of mortgages in which borrowers put just 3% down, and first-time home buyers are able to apply for the loans as of a few weeks ago, Federal Housing Finance Agency Director Mel Watt announced earlier this month.

Borrowers will still have to meet the usual underwriting, income documentation and risk management standards. All loans in which buyers put less than 20% down including Fannie and Freddie require that borrowers take out private mortgage insurance or other risk sharing thereby affecting monthly payments.

Watt shared details about the new credit options to a roomful of bankers in Las Vegas, where there was marked optism that these actions will encourage first-time buyers to join the housing market. The loans will also allow homeowners with partial equity who are not eligible for the Home Affordable Refinance Program (HARP) to refinance, although they’ll have little or no ability to take cash out of their homes in the process. This will get some things going in the banking industry.

The new initiative builds on a program Fannie Mae offered through state housing finance agencies and will include home ownership counseling, and FHFA will monitor loan performance on an ongoing basis, Watt said in a statement released Dec 8, 2014.

Fannie Mae reports that borrower’s paperwork could have started as early as Dec. 13. Freddie Mac’s new Home Possible Advantage program will become available for mortgages with settlement dates on or after March 23.  So, this is a good time to get into the market. Interest rates are down. Incentives are up. Things are about to change. Now is a good time to lock in and make that first home purchase or sell and downsize or upsize.

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