More low down payment options

 Loan Programs, Residential Mortgage  Comments Off on More low down payment options
Aug 222018

For more information, please contact me at (512) 261-1542 or

By G. Steven Bray

Fannie Mae and Freddie Mac have 3% down conventional loan programs that target low-to-moderate income folks. We used to call these community lending programs because they’re designed to fulfill Fannie and Freddie’s mandate to provide assistance for mortgages to low and moderate income families and underserved areas. The programs go by the monikers HomeReady and HomePossible.

Unlike the programs we discussed yesterday, you don’t have to be a first-time homebuyer to qualify. However, if the buyers are first-timers, one of them must complete a homebuyer education course for the HomePossible program. For HomeReady, one must complete homebuyer education regardless of first-timer status.

The programs are income-limited. By that I mean your total income cannot exceed a limit, which can differ even within a given county. For both programs, the limit typically is set to an area’s median income. However, the programs waive the limit in disaster areas and in certain areas Fannie and Freddie consider to be underserved. Call me if you want some help determining the income limit for your area.

So, given the programs we discussed yesterday, who cares that we have another 3% down program? Three reasons:

– Conventional low down-payment programs require mortgage insurance, which can bump up your housing payment quite a bit. HomeReady and HomePossible have lower mortgage insurance rates than the other low down payment programs.

– Second, the programs’ easier guidelines may make it easier for you to qualify.

– Finally, you don’t have to be a first-time homebuyer. For HomePossible, you can’t currently own other real estate, but Freddie carves out some exceptions to that in cases of divorce or inheritance.

The programs have other features and restrictions that may make one more appropriate for you than the other. Give me a call to see what’s the best fit for your situation.

Fannie sweetens HomeReady mortgage program

 Loan Programs, Residential Mortgage  Comments Off on Fannie sweetens HomeReady mortgage program
Mar 272017

For more information, please contact me at (512) 261-1542 or

By G. Steven Bray

In an effort to encourage homeownership for lower-income consumers, Fannie Mae has expanded its HomeReady loan program. The program allows as little as 3% down payment and sweetens the interest rate for those who qualify.

The program has income limits in most areas, and until recently the limit was 80% of median income in many areas. Fannie raised the limit to 100% of an area’s median income, and in special low-income census tracts, the program has no income limit.

Fannie also changed the program to allow borrowers to own another home. This may be appealing for those who currently own a home and don’t want to wait for it to sell before closing on their new home.

The program is attractive for a couple reasons:

– First, the program allows for a higher debt ratio, up to 50% of a borrower’s income. In addition, the income of a roommate or significant other can be considered for qualifying even if that person is not on the loan.

– Second, Fannie absorbs some of the risk premium usually associated with low down payment loans. Fannie requires a lower mortgage insurance rate and allows a lower interest rate than is usually associated with these loans.

HomeReady borrowers are required to complete a homebuyer education course, and one naturally wonders whether that compensates for the lower risk premium assigned by Fannie. Time will tell whether the default rate on these loans justifies the favorable treatment.