Conventional Purchase loans back to 3% down!

There’s been quite some hype the last few weeks about the official ROLL-OUT of the conventional 3% down mortgage program being re-introduced. I wanted to make sure I shared the info from the perspective of someone who’s actually writing loans for home-buyers.

It’s good to see this program coming back to help with the housing market as we return to a state of normalcy in the rest of the 2014 winter market and 2015 spring market. In November of 2013 Fannie and Freddie took away the 3% down programs and the minimum down-payment that was needed moved to 5%. With the exorbitant fees (paid in 2 forms of Mortgage Insurance) with FHA purchase loans… buyers have been pushed to save another chunk of down-payment money to get into a Conventional loan.

There as essentially 2 programs for folks to be aware of right now: the MY Community Mortgage and the Standard Conventional Mortgage. The biggest TAKE-AWAY for consumers and Realtors to understand about anyone opting to put less than 5% down is that they have to be considered a FTHB (First Time Home Buyer) within the definition of the mortgage industry. Fannie Mae defines it as:

…had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property. In addition, an individual who is a displaced homemaker or single parent also will be considered a first-time home buyer if he or she had no ownership interest in a principal residence (other than a joint ownership interest with a spouse) during the preceding three-year time period.

This means that the people who may have owned a home and lost it due to an economic event (foreclosure or short-sale) over 3 years ago may NOW be considered a FTHB again.

Here are a couple bullet points on the other specifics to these programs:

Fannie Mae My Community Mortgage (MCM)

• 97% LTV

• One borrower must be a FTHB (first time home buyer)

• Pre-purchase homebuyer education required

• Fixed rate only

• 1 unit principal residence only

• Reserves can come from a gift (reserves determined by DU)

• Median income limits apply (ask your “mortgage guy” about these)

• Lower MI coverage

• May not own any other residential property at time of closing

Standard Purchase Mortgages (Non-My Community)

• 97% LTV

• 1 borrower must be a FTHB (first time homebuyer)

• Fixed rate only

• 1 unit principal residence only

• No income limits

• Regular MI coverage

• No restriction on owning other residential properties

What’s most important is that people who are looking to buy a home talk with a qualified, well-respected “Mortgage Guy” when they first start the process. Sometimes there are enough questions in an initial phone conversation that come up that may warrant much more info to be submitted to confirm what the best program you may or may not qualify for.

The other suggestion is a review of credit to make sure that can have the fewest LLPA’s (relative to your LTV). Confirming your PITI will be at the allowable DTI for qualifying and within the new QM rules according to FNMA. (to learn more about all the important mortgage acronyms used… give us a call).

Steven Brand - nmls# 261849. BBMC Mortgage. www.StevenBrandHomeLoans.com

Direct: 612-386-5306