The Federal Housing Finance Agency announced its attempt to better increase mortgage credit availability to US borrowers in October. Now, with the recent announcement of a 3% Down Payment loan by both Fannie Mae and Freddie Mac, it seems the FHFA’s efforts have paid off.
Both Fannie Mae and Freddie Mac announced new 97& loan-to-value mortgages that will be available to first time homeowners. The new loans help creditworthy borrowers without capital get a home loan. The loan should help buyers who want to own a home and can afford monthly payments but cannot pay for the down payment and closing costs.
Both Fannie Mae and Freddie Mac don’t foresee the loan becoming a major part of their business. The loans target a very specific borrower in their eyes and the loan will be awarded with this specificity in mind. With that being said, the loan should appeal to a lot of millenials, who as of yet, have not been buying up real estate like previous generations. Many economists have predicted millenials becoming major players in the real estate world in the coming years and steps like the one taken by the FHFA to broaden credit requirements should help bring these buyers to the table.
For those first time homebuyers who wanted a home, but until now did not have enough capital to put down, now may be the time for them to re-engage their lender and see if a 3% down payment is a feasible alternative to a standard 30 year fixed rate mortgage..