AL and FL Mortgage News

1 % Down Conventional Loans

December 3rd, 2017 6:14 AM by Devin Murray

In mid-2017 both Fannie Mae and Freddie Mac re-branded and released their own versions of a loan program which allow borrowers to finance homes with just 3% down for people with credit scores as low as 640.  For those who qualify this still is a huge development in real estate finance as an alternative to FHA financing which requires 3.5% down not necessarily because of the 0.5% down payment difference but because of PMI options not available on FHA loans.  FHA still has many advantages like allowing some with scores between 580-640 to get low down payment financing with relatively but recently Fannie Mae really is trying to prove it is a worthy competitor for your loan.

We are not sure how long it will last but Fannie Mae is currently allowing borrowers with a 720 or better credit score to do 1% down conventional financing and this is HUGE.  You would need to speak to a licensed originator to determine if you qualify but the key to this program is knowing if the property you are wanting to buy has income limitations.  What excites us about this is just what the limits are and which areas have “NO LIMIT”.  You can easily visit their website here to find out for your area.   

Compared to say USDA loans, it is noteworthy to say that this income limitation is not a total household income figure but applies to just whoever is on the loan.  For example if you make $60,000/year and your spouse makes say $45,000/year you might be able to meet the income limit by just putting your spouse on the loan if the limit is say $49,000.

For those who simply exceed the income limit and still want conventional financing, it is important to point out that Freddie Mac has much greater flexibility with income limits compared to Fannie Mae on their 3% program.  If you are interested, you can search Freddie Mac’s income limits here.  

So if you think you qualify for either the 3% or 1% down conventional programs or want more information you really need to ask your loan officer about PMI options on these loans.  Ultimately PMI on these loans automatically comes at a reduced rate compared to PMI rates on regular conventional loans which if nothing else can mean big savings for you.  For those with higher credit scores it may make sense to discuss lender paid PMI where your lender pays a single premium on your behalf thereby eliminating monthly PMI built into your payment. 

If you are buying in Florida or Alabama and want to discuss your scenario with a licensed loan officer you can call 888-269-8335, email us or apply online 24 hours a day


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