Wisconsin Mortgage Corporation Shares What The 3% Down Payment Program Means

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Recent news reports have been featuring new programs announced by Fannie Mae and Freddie Mac designed to stimulate more home ownership. Although details are still being worked out, both mortgage giants are intending to offer something that will only require a 3% down payment on a new home loan.


Fannie Mae has already begun their roll out this past month. Freddie Mac’s “Home Possible Advantage” program will be available for home loans with settlement dates on or after March 23, 2015.


According to Bon Salle, Executive Vice President at Fannie Mae, “Our new 97% loan-to-value ratio offering is simply one way we are working to remove barriers for credit-worthy borrowers to get a mortgage.”A higher loan-to-value ratio brings more risk for lenders, causing lenders to scrutinize borrowers’ credit profiles to see how they have borrowed and repaid money in the past. Borrowers with sub-par credit probably won’t qualify for a 97% home loan in 2015.


With the higher loan-to-value ratio, Fannie Mae requires at least one of the people named on the mortgage application to be a first-time home buyer. They define a “first-time” purchaser as someone who has not owned a home within the last three years. Freddie Mac’s 97% financing product is open to repeat buyers, as long as the borrower does not have “any individual or joint ownership interest in any other residential properties” at the time of purchase. For both programs, the loan must have a fixed rate of interest. Adjustable-rate mortgages (ARMs) are not permitted by the new 97% financing programs. The term can be up to 30 years in length, but no longer. Lenders offering the Fannie and Freddie products must perform full income documentation to reduce risk. This means requesting any and all documents necessary to verify the borrower’s income situation — tax returns, pay stubs, bank statements, etc.


As more details become available, we expect larger banks like Wells Fargo, Chase and US Bank to give guidance on when and if they will adopt these new programs. A 97% Conventional Loan is not new to the mortgage market. These programs are really a redesign rendition with some different bells and whistles. Other programs like FHA, Federal VA and USDA Rural Housing will continue to play an important part in efforts to achieve home ownership. More options are a good thing, and we expect to see more creativity in 2015.


Buyers should always get pre-approved with a qualified lender, who will look at all options available. Loan Officers at Wisconsin Mortgage Corporation will do a complete analysis with home buyers before they begin to house hunt.


As rates are low and prices are good, homes will sell fast. Don’t let winter weather interrupt your buying plans. Contact a Shorewest Agent and a Wisconsin Mortgage Corporation Loan Officer and beat the spring rush.




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