Fannie Mae & Freddie Mac recently announced a new loan program that is a potential game changer for first-time home buyers. Recognizing that income growth hasn’t kept pace with rising home values, and saving up for a down payment can be a challenge for many would-be buyers, the announcement (which was made in December during the busy holiday season but is just now gaining traction with the spring housing market) should open up home ownership to many who thought they simply couldn’t afford it, especially 20-somethings who are getting squeezed by rising rents.
The new program applies to first-time buyers only (only 1 co-borrower needs to be in that category, though) and only on owner occupant, primary residence purchases.
This program provides an alternative to FHA, which for the past few years was the lowest-down payment option available (3.5%). However, in recent years FHA had increased both it’s premiums & its monthly mortgage insurance payments, making it a less attractive program. Additionally, to use an FHA loan on a condominium or townhome purchase, the entire association would have to be approved for it – which routinely reduces the number of available properties a buyer using this type of loan can purchase.
With this new program, it allows those buyers who are solid financially, but don’t have the 5%+ down payment needed for a conventional loan.
All in all, I think it’s going to be a very useful tool for many of my buyers in 2015. If this sounds like it could make home ownership a possibility for you, contact me today to discuss your options!