First Time Buyer Program Rolled Out by Fannie Mae

So you are waiting to buy your first home in Los Angeles as you need to save up for a down payment. The wait maybe over as Fannie Mae has launched a new first time homebuyer program that allows you to buy a house or condo with as little as 3% down. Here is the low down…

Key components:

·    Only available for conforming fixed rate (loans under $417,000) and unlike FHA, condos are ok. That buys you a cabin/shack in Highland Park or a 1 bedroom condo in West LA - maybe.

·     1 unit primary residences only (in other words you have to live in it and it can’t be a duplex).

·     Fixed Rate Loan Only (the rate never changes throughout the life of the loan).

·     High Balance and ARM products are not eligible (‘nuff said)

·     At least one buyer must be a first time home buyer (if you have bought a house before it's time to get your artist brother that’s 50 to buy his first house on the loan with you).

·     No income limits (you can be uber rich and still keep your money in the bank and borrow 97% of the purchase price of the house and use your money for a new Lambo).

·     Standard borrower minimum contribution requirements. The minimum amount of funds you must contribute from your own funds is 0%. You may contribute money from your own funds but all the funds can (subject to verification) come from gift funds. Time to ask mom and dad for a little money towards your first home. This applies only for single unit primary residences. Second homes and 2-4 unit buildings have a minimum contribution from the borrower of 5%.

·     MI coverage requirement is 35%: MI is short for mortgage insurance.  35% mortgage insurance is the amount of MI coverage needed for this small down payment.  The more down payment you have, the lower the coverage needed.  35% is the highest amount of mortgage insurance coverage needed.   And Fico score will affect the actual monthly premium paid by the buyer. In other words because you are putting less than 20% down you have to pay mortgage insurance, which is pricey.

·     Reserves will be per DU findings (this means the bank wants to see that you have a couple months or more of savings left in the bank to cover the mortgage if you lose your job or we have a zombie apocalypse) you need to have some savings to cover the payment for at least a few months.

Here is the link to the Fannie Mae announcement:

https://www.fanniemae.com/content/announcement/sel1415.pdf

Thanks to Dana Dukelow with Wintrust Mortgage for giving us all the 4-1-1 on this amazing program.