Calling All Home Buyers! The 3% Down Payment Makes a Comeback
Socking away enough for a down payment isn’t easy. In fact, recent research found that, with Americans’ current savings rate, it would take the average buyer as long as 12 years to build up a 20% down payment on a median-priced home. Fannie Mae announced an option for qualified first-time homebuyers that will allow for a down payment as low as 3%.
As a result, many first-time, younger and lower-income homebuyers have been largely left out of the housing market in the years since the recession.
Now, Fannie Mae and Freddie Mac are hoping to change that. The mortgage giants announced on Monday that they would begin backing mortgages with down payments as low as 3%. Fannie’s program will start this month; Freddie’s will begin March 2015.
The catch? Borrowers would have to meet strict standards to be eligible, such as a credit score of at least 620. The program would also only be available for first-time homebuyers, those who haven’t owned a home in a few years, and people with lower incomes. Further, borrowers would be required to undergo home-buyer counseling and purchase private mortgage insurance before signing on the dotted line. And those eligible for the program would likely have to meet other measures to offset the increased risk, like boasting a low debt-to-income ratio.
“This will be particularly helpful to those who are strapped by wealth rather than credit challenges,” Jim Parrott, a senior fellow at the Urban Institute, told The Wall Street Journal. – See more at: http://www.trulia.com/blog/calling-home-buyers-3-payment-makes-comeback/?ecampaign=cnews&eurl=www.trulia.com%2Fblog%2Fcalling-home-buyers-3-payment-makes-comeback%2F#sthash.yY8d4i4n.dpuf