3% Down Payment Freddie Mac Program

December 19, 2014 Marc Edelstein FHA mortgages in Michigan, First Time Home Buyers, Michigan Mortgage Lender, Mortgage Tips, Oakland County Mortgage Banker, Wayne County Mortgage Banker 0 Comments

3% Down Payment Freddie Mac ProgramLast week I discussed the 3% down payment Fannie Mae program and how that might impact borrowers. This new program is going to open up a lot of opportunities for homebuyers with good credit and small down payments by allowing them to still qualify for preferred pricing through conventional loans. But in addition to the Fannie Mae program, there is also a Freddie Mac 3% down payment program which has slightly different qualifications.

The Home Possible Advantage, as Freddie Mac calls it, is a down payment option which is available to borrowers who fit certain criteria. First, it is for both first-time homebuyers and people who have owned a home before. This is important to note, as the Fannie Mae program is only for first time homebuyers. This flexibility might be attractive to you if you currently own a house.

Second, there are strict credit and income guidelines. If you do not meet the credit guidelines, then you would likely be looking at FHA for your lending needs, so this program is primarily targeted to folks with good credit. The income piece, however, is a bit trickier. You must be considered a “low” or “moderate” income earner. This means you must earn no more than 100% of the area’s median income. So you will want to check with your lending professional to make sure you can income qualify in this capacity.

Third, this program can be used for refinancing. If you have limited equity in your home but want to bring your interest rate down, this is a very viable option. It can be a way to get out of a FHA loan and into a conventional loan, saving you on the cost of mortgage insurance.

Finally, you will need private mortgage insurance. This is a requirement of any conventional loan with less than 20% equity but is a short term cost. Once you have 20% equity in your home, you can remove the PMI without any impact to the mortgage itself.

So if you are in the market for a new house but have a limited down payment, this could be a wonderful option for you.

If you have any questions about the program or how it might relate to you, please contact me. If you have anything to add about this new program, please leave a comment.

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