A few days ago, HousingWire reported that both Fannie Mae and Freddie Mac formally announced their 3% down options on home purchases. Fannie Mae’s plan will be effective December 13, 2014 while the Freddie Mac plan will be available March 23, 2015. The HW article quotes FHFA Director Mel Watt:
“The new lending guidelines released today by Fannie Mae and Freddie Mac will enable creditworthy borrowers who can afford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgage with 3% down. These underwriting guidelines provide a responsible approach to improving access to credit while ensuring safe and sound lending practices.”
This is great news to millions of purchasers that have been denied the opportunity to own their own home because of the almost impossible burden of saving for a 20% down payment.
Will these programs create future challenges?
Certain pundits fear that low down payment programs will create a wave of foreclosures down the road. Mr. Watt also addressed this concern:
“To mitigate risk, Fannie Mae and Freddie Mac will use their automated underwriting systems, which include compensating factors to evaluate a borrower’s creditworthiness. In addition, the new offerings will also include homeownership counseling, which improves borrower performance. FHFA will monitor the ongoing performance of these loans.”
We also recently addressed this issue.
Here are the direct links to the guidelines for each program:
Remember, as with any new program, there will be some confusion as it is unveiled. Contact a mortgage professional for a deeper understanding. Don’t have a mortgage person yet? Contact your local real estate agent for a referral.
This announcement really aught to help boost the industry going forward into 2015 and beyond, allowing more potential consumers to become homeowners who might have not qualified before with the hire down payment requirements. I have seen comments that it might be a bad thing, and increase foreclosures, but my hope is that it will have an opposite affect on the industry. They are not going to lessen the more stricter requirements to qualify for a mortgage, just the amount needed for down payments, allowing more consumers to enter the marketplace. So in the end, it should have a positive impact on the real estate industry.
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