Freddie Mac’s New 3% Down Program
Today, Freddie Mac is scheduled to start buying mortgages with down payments of only three percent – the first time down payments have been this low on Freddie Mac loans in nearly five years. The program is called Freddie Mac Home Possible AdvantageSM.
In a recent Executive Perspectives, Dave Lowman EVP, Single-Family Business Freddie Mac, explained the potential impact this program will have on the housing market:
“There’s a new reason Realtors and lenders may expect more qualified borrowers at the closing table during this spring’s home buying season. In addition to low mortgage rates and rising job growth, the down payment hurdle is starting to shrink for creditworthy borrowers, including first-time homebuyers.”
And the mortgage industry agrees with Mr. Lowman. In a recent survey of mortgage originators by the National Association of Realtors (NAR), it was revealed that most loan officers believe the move to a lower down payment will increase access to mortgage credit. Here are that survey’s findings:
Bottom Line
Many potential buyers are “ready and willing” to buy a home but have been afraid they may not be “able” because of a lack of adequate savings for a down payment. Check with a local real estate or mortgage professional to understand what the new rules may mean to you.
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What FICO score is required for a 97% loan? I hope it is full-doc, too. The last thing this country needs is to extend a lot of credit with little to no collateral to people who do not show a history of having the ability or willingness to pay their financial obligations. America tried it once with B, C, and D credit loans, as well as other 100+% financing options and when 5-25 and 7-23 loans adjusted to their new, higher rates, the economy imploded.
These are full doc loans. Reducing the amount of down payment money in states which very high property taxes like NH is huge. When your property takes are around $500-700/month on a 200,000-225,000 home that is a huge hit when you need to escrow and do a down payment and additional closing costs. So with closing costs when you are putting 0-3.5% down you are looking at bringing to closing around $10k after doing your $1000 deposit and paying for inspections and appraisals at around another $1500. Then you also have to show a healthy reserve in savings. That is a lot of money to come up with first time home buyers or families.
This new down payment program should help many potential home buyers qualify for a home loan, who may not have qualified previously. Down payment is a huge limiting factor in potential buyers ability to purchase a home.