Low Down on New Low Down Conventional Loans

Beginning this week, home buyers can purchase a residence under Fannie Mae’s standard 97 percent loan to value offering or its My Community Mortgage, both with a 3 percent down payment, requiring at least one co-borrower to be a first-time buyer. This is for primary home, single-family, and condo-type housing and not for second homes, manufactured homes, or investment properties. Freddie Mac, meanwhile, is close to ending a four-year timeout from its previously popular mortgage that facilitated home financing with as little as 3 percent down. It plans to bring back a version dubbed Home Possible Advantage near the end of 2015’s first quarter that will be limited to low- and moderate-income borrowers. Another option still in place is FHA financing that is not restricted to first-time buyers, requiring just 3.5 percent down. Shopping around does matter. A 2012 Fannie Mae survey indicated that if a borrower shops multiple mortgage brokers, he or she can save $1,000 or more in closing costs. Ways to come up with the down payment range from dipping into savings or gift funds to using retirement savings. “You can withdraw, you cannot borrow against your IRA. You can do this without penalty for first-time buyers, subject to normal taxes,” notes Stuart Friedman, a financial consultant at Burnham Gibson Financial Group in California. | Read More