It took awhile but Fannie Mae will roll out it’s new 3% down program on Monday. Since FHA increased their monthly mortgage insurance premiums last year to 1.35% there has been a large demand for a good low down payment loan. I’ve said on my blog for the past year that in order for the housing market to really get going there needed to be an affordable program that allowed low down payments to credit worthy borrowers. Now it’s here!
Below are a few parameters you need to be aware of with Fannie’s 3% down program .
* At least one borrower has to be a first time home buyer (can not have owned a home in the past 3 years).
* Where the program is especially strong is if the borrower can qualify for the My Community Mortgage (MCM). In our area that means that the income of the borrowers on the loan can not exceed $82,600. If the borrower qualifies for the 3% down Fannie My Community then the mortgage insurance is discounted which will help dramatically with the monthly payment. Note that if the borrower makes more than $82,600 then they can still do Fannie’s 3% down program but the mortgage insurance will be more expensive.
* Only fixed rate loans, no adjustables.
So, how good is the program? Lets take a $200,000 purchase price and see what the differences are between the Fannie 3% down My Community compared to FHA:
1) Down payment. Fannie 3% down = $6000. FHA 3.5% down = $7000.
2) Monthly payment for Fannie 3% down My Community = $1225. FHA = $1350.
3) Equity in property with Fannie 3% down = $6000. FHA $3623 (FHA has an up front mortgage insurance of 1.75% added to the loan which reduces the borrower’s equity).
I applaud Fannie for stepping up. Hopefully FHA will wake up and start being competitive and get back in the game by lowering their mortgage insurance. We will see. I believe this program will be successful and if all goes well the next step will be a zero down payment Fannie loan to borrowers that have strong incomes and great credit but lack the down payment money. But for now, good job Fannie!