January 24th, 2019 6:26 PM by Jackie A. Graves
mortgage loans, VA, FHA and USDA, require little to no down payment. FHA loans
ask for a down payment of at least 3.5 percent of the sales price while the
other two don’t require any down payment whatsoever. But did you know there are
conventional loans that also accept a down payment of just 3.0 percent? There
are three such programs, Fannie Mae’s Home Ready, Freddie Mac’s Home Possible
and the Conventional 97, another Fannie entry. But the Conventional 97 comes
with fewer strings attached.
Home Ready is
a program designed for first time buyers and asks for a 3 percent down payment.
The program was designed to help underserved areas and geared toward low to
moderate income buyers. The property must be owner occupied and there are
income limitations for the borrowers. Borrowers cannot make more than 100
percent of the median income for the area.
areas designated as high-minority, there is also an income limit at 100 percent
of median income. Home Possible is Freddie Mac’s entry and has similar
restrictions regarding income and location. Because of the income limitations
and areas served, there will be limits regarding the final loan amount. Buyers
must not have owned a home within the previous three years.
programs, borrowers must take a Home Buyer Education Course from an approved
provider. The lender has a list of such agencies that help consumers get into
their first home.
player in this mortgage world is the Conventional 97. This program also
requires just a 3 percent down payment but there are no restrictions regarding
loan limits. Instead, the only limit is the one all conforming loans have which
is $484,350 in most parts of the country. Like the others, the property must be
for a primary residence and the Conventional 97 cannot be used to finance a
rental or investment property.
has been around for several years but appears to be catching on. The Conventional
97 can be compared to an FHA loan, the primary difference being the 3 percent
needed for the conventional loan and 3.5 for the FHA. FHA loans also have a
county-by-county loan limit as well, but they’re going to be higher compared to
Home Ready and Home Possible. For most parts of the country, the maximum FHA
loan for 2019 is $389,350.
All of these
low down payment options will require some form of mortgage insurance and some
premiums are higher than others. But if you or someone you know is looking for
a low down payment loan program, take a look at the Conventional 97 while
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