Since the mortgage crisis of 2008, the public has gotten used to the conventional wisdom which says that you need a 20% down payment to buy a home. A recent IPSOS survey reveals that many consumers continue to overestimate the down payment funds needed to qualify for a home loan. More than 40% of consumers still think a 20% down payment is always required.
In reality, new programs initiated by the government-backed purchasers of mortgage loans can be your secret weapon to winning the down-payment war. Using these programs, many loans are written with a down payment of 3% or less.
Home Ready is Fannie Mae’s new loan product designed to serve today’s creditworthy, low- to moderate-income borrowers. The benefits to borrowers are:
- HomeReady features pricing that is better than or equal to standard loan pricing.
- Lower than standard mortgage insurance coverage requirements for loans with “loan to value” of greater than 90 percent up to 97 percent (3% down payment).
- Cancellable monthly mortgage insurance payments
- Gifts, grants, and Community Seconds® can be used as a source of funds for down payment and closing costs, with no minimum contribution required from the borrower’s own funds
Home Possible and Home Possible Advantage are Freddie Mac’s low down payment options for low- to moderate-income homebuyers or buyers in high-cost or underserved communities. The benefits to the borrowers are:
- Maximum “loan to value” of 97 percent (3% down payment)
- Down Payment can come from a variety of sources, including family, employer-assistance programs and secondary financing.
- Stable, Fixed-rate mortgages with a term of up to 30 years.
- Reduced mortgage insurance coverage
With these programs, many renters may actually be able to enter the housing market sooner than they ever imagined, all while bringing less cash out of pocket to the closing table. Move-up buyers can sell their starter condos and townhouses and move to more desired neighborhoods. In addition, the pricing, terms and speed of underwriter are often much better than traditional FHA loans.
Whether you are a current homeowner looking to move to a home that will better serve your family’s current needs, or a first-time buyer looking for a starter home, it is easier to get a mortgage today than it has been at any other time in the last ten years. Give me a call and let’s talk! I can connect you with a lender who may be able to help you open the door to the home of your dreams!
Jennell Alexander, Realtor
Heymann Realty, LLC