3% DOWN PAYMENTS ARE BACK For a long time, home buyers had to come up with at least 20% down to buy a home. Then it got reduced to 10%, then 3%, then nothing, and then at the peak of the madness, buyers could get loans for 125% of the value of the home and sometimes even walk away from the closing table with money in their pockets after buying a home! When the mortgage meltdown happened, lenders really tightened up their guidelines and the low, low down payment plans were few and far between, or they were really, really hard to qualify for, and also very expensive in regards to fees. As of right now, FHA loans are the go-to loans for low down payment as they can go as low as 3.5% down. Since they are basically the only source for these, they’ve been jacking up their fees and insurance rates because they had no competition (and because this is still a risky loan and FHA lost a TON of money in the recent past!) However, changes are coming that will make the FHA loans look much less desirable, in my opinion. This past week Fannie Mae and Freddie Mac announced that they will start backing mortgages with down payments as low as 3%. At first glance this isn’t much different than the 3.5% down payment for FHA loans, but there is more to the story! When a buyer gets an FHA loan, they have to pay the mortgage insurance every month until the loan is either paid off or refinanced. In the old days, FHA would let that insurance come off when the value of the house rose, or the balance was paid down enough to where there is at least 20% equity. Fannie and Freddie will allow the mortgage insurance to come off let FHA used to, so this would be a BIG advantage to them over FHA. So if you are shopping for a mortgage, be sure to ask your lender representative about these new 3% down loans.
Posted on: Mon, 15 Dec 2014 17:02:23 +0000
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