In a serious move to boost home sales, Fannie Mae and Freddie Mac are launching new products that only require a minimum 3 percent down payment.
Fannie Mae’s version of the new program is available now and will only be offered to first time home buyers, or more specifically, those that haven’t owned a primary residence for the past three years.
Freddie Mac’s version of the program, dubbed Home Possible Advantage, doesn’t start until March 2015.
While Freddie may be a little late to the ‘small down payment party’, they won’t show up empty-handed. Unlike Fannie, Freddie borrowers will not have to be first time home buyers; the program is open to all.
Conventional vs. FHA: The Rematch
Just when you thought FHA was taking over the home purchase market, Fannie and Freddie reload and come through the doors, guns blazing. Before these new programs, the required down payment for a conventional loan sat at 5%, as compared to a more reasonable 3.5% down payment requirement for FHA loans. Now, beating FHA’s minimum by half a percent, boasting a shiny new 3 percent down payment minimum, Fannie and Freddie have truly become the one-uppers of the mortgage industry.
Less $ Down + Less $ Monthly = 1 Happy Home Buyer
Not only will these new programs offer homeownership for less money down, but they’ll also make it less expensive to borrow. When taking into consideration the increased cost and duration that FHA mortgage insurance has versus similar conventional programs, going Fannie or Freddie could save a new home buyer tens of thousands of dollars.
The Bottom Line
If you’re a first time home buyer with decent credit, you could save a ton of money by going this route on your new home purchase. Get in touch with an experience mortgage broker today and find out how much you could potentially save.