BOULDER – You’re in the market for a new home, but you don’t have tens of thousands of dollars saved for a down payment. Sound familiar? It’s a common situation for many Americans. Fortunately, Here, we’ll explain two popular programs: Fannie Mae’s 3% down payment program and Federal Housing Authority (FHA) loans.
To qualify for Fannie Mae’s program, at least one of the parties must be a first-time home buyer, meaning that either you or your partner can say that you haven’t owned any residential property in the past three years. However, there’s a caveat. If it has been three years since you have owned a home, the clock starts over once you have been qualified to participate in one of these first time homebuyer programs. FHA loans do not require you to be a first-time homebuyer, but you can have only one FHA loan at a time.
Fannie Mae’s 3% Down Payment Mortgage
Fannie Mae’s 3% down payment mortgage is an excellent option for homebuyers who meet underwriting and income requirements but may not have the funds readily available for a larger down payment.
In addition to the first-time home buyer requirement, borrowers must meet the following criteria in order to qualify for a Fannie Mae mortgage:
– The loan amount may not exceed $417,000.
– The property must be a single-unit residence and the borrower(s) must plan to live in the home as their primary residence.
– The mortgage taken out must be a fixed rate mortgage (adjustable rate mortgages are not eligible).
– There is no specific minimum credit score, aside from that which is required for a typical conventional home loan.
– There is also no income limit. Fannie Mae permits borrowers to use gift funds as part of their down payment. Buyers are required to pay private mortgage insurance (PMI) as part of their monthly payments.
As I’ve written about previously, homebuyers employed in the marijuana industry may face challenges securing a loan due to the fact that marijuana remains illegal under federal law, which governs banks and lenders. Many down payment assistance programs, including FHA loans, do not permit marijuana-related income to count toward mortgage qualification. This is not the case with Fannie Mae for w-2 employees. For independent contractors who have a relationship with the marijuana industry and wish to qualify for a 3% down payment, it’s important to know that Fannie Mae will only consider those who own less than 25 percent of any marijuana-related business.
FHA loans: 3.5% down
The Federal Housing Authority (FHA) insures the highest percentage of mortgages of any insurer in the world. In fact, nearly one in four new U.S. mortgages is backed by the FHA. Their 3.5 percent down payment option is a popular choice for homebuyers with limited available funds. Criteria to qualify for this program are:
– A minimum credit score of 580 is required.
– Eligible homebuyers must have documented, verifiable income.
– Like Fannie Mae’s 97 Conventional, homebuyers must intend to live in the home being purchased as their primary residence.
– Buyers are required to pay mortgage insurance premiums (MIP) as part of their monthly payments.
– Borrowers may use gift funds as part of their down payment.
– There is no income limit.
Before you make a decision about something as important as your home mortgage, it’s imperative to understand the different down payment assistance programs that
Michaela Phillips is the Vice President of Mortgage Lending at Guaranteed Rate, Inc., the 8th largest retail mortgage company in the country. Since entering the mortgage industry in 1994, she’s consistently been a top producer. Being a VP at Guaranteed Rate offers many advantages to her and her clients including unparalleled customer service, efficiency, and most importantly competitive rates. Contact Michaela at 303.579.5517, e-mail firstname.lastname@example.org or visit michaelaphillips.com. NMLS:312874.