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Conventional loans with 3% downpayment

By
Mortgage and Lending with Integrity Home Finance

Fannie Mae announced  today new, national policy on down payment requirements for conventional, conforming mortgages the company will purchase or guarantee. Starting June 1, 2008, Fannie Mae will accept up to 97% LTV ratios for conventional, conforming mortgages processed through DU, and 95% LTV ratios for loans underwritten outside of DU, in all geographic locations in the United States. "The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy. ‘We are able to adopt this new, national down payment requirement, even in markets where home prices are declining, because our new automated underwriting risk assessment model DU Version 7.0 will limit risk layering and assess each loan more precisely.""

Comments (2)

Richard Byron Smith, NMLS #184479
Mortgage Loan Officer, Fairway Independent Mortgage Corporation NMLS #2289 - Chattanooga, TN
Mortgage Loan Officer

Do you think that lenders will determine individually whether to participate in the higher LTV's for declining markets? What about MI companies?

Thanks for the update.

May 16, 2008 01:36 PM
Jorge Merlos
Integrity Home Finance - Rancho Cucamonga, CA

I think most of the changes will be "lender specific," as it has been with the recent changes with the Stimulus Package loan amounts & declining market policies.  Although Fannie has announced that they will now do 97%, investors will have to determine their own willingness to take this risk.  An example of this is that as of now Fannie allows you to go to 95% LTV even though the property may be in a declining market.  This is permitted as long as the borrower has their own 5% funds. But, nine out of ten lenders will not allow this, instilling their own "lender specific" guides and reducing the max LTV to 90%.  This also applies to Mortgage Insurance (MI) companies where 99% them will not insure the loan if the LTV is 95% and in a declining market.  I think we'll have to wait some time, just as we did for the pricing on the FHA & Conforming Stimulus Package loan amounts, and see what most lender's and MI companies decide to do in light of these recent announcements.

May 20, 2008 07:22 AM