Fannie Mae has expanded the maximum loan-to-value up to 97% LTV for their Conventional 97 mortgage program. This means home buyers will only need a 3% down payment to benefit from Conventional financing.
The standard Conventinal 97 program is perfect for first time homebuyers in California who have decent credit and simply want an affordable low down payment alternative to FHA financing.
Sellers guide announcement SEL 2014-15, eligibility matrix, and DU release notes.
What’s old is new again. Contrary to what every mortgage lender and media outlet is claiming, this is not a new loan program. It’s just reinstating and expanding the maximum LTV. If it was a new program they would have branded it with a fancy name, kind of like when they launched the HomePath loan program.
The 3% down payment Fannie Mae Conventional 97% LTV home loan was suspended in 2013 because many politicians thought low down payment mortgage programs like this were a primary cause of the housing collapse….but we know that’s not true.
The reinstated Conventional 97% LTV program can be used to purchase or refinance. Refinancing requires the loan be a current Fannie Mae secured loan and allows the borrower to roll in up to $2,000 to pay closing costs.
Fannie Mae Conventional 97% LTV Guidelines
- Minimum 3% down payment
- No max income restrictions
- No minimum borrower contribution
- Minumum credit score 640
- At least one borrower must be a first time homebuyer
- Homebuyer education may be required
- Primary residence SFR 1 unit only
- Max 45% DTI ratio or whatever DU approves
- Reserves determined by what DU findings require
Downside of the Conventional 97% LTV Loan
The standard Conventional 97 program may not always be your best option because standard LLPA’s will apply if you want the reduced PMI coverage. This means if you have a credit score below 720, you won’t be able to lock in the lowest interest rate possible unless you pay discount fees and your PMI premiums may be a bit higher than desired.
But wait……maybe you’re thinking you don’t deserve or shouldn’t even be buying a home if you don’t have a 20% down payment. Read this blog post about low down payment loans.
Alternative Loan Options
Two alternatives to the standard Conventional 97% LTV mortgage program are the MyCommunity Mortgage (easier to qualify for) and Freddie Mac’s Home Possible Advantage Mortgage program. All three programs only require 3% down payment but have suttle differences when it comes to eligibility, qualifying criteria, PMI coverage, income limitations, and interest rates.
FHA 3.5 down with homebuyer assistance, USDA $0 down payment, and VA loan financing may be good low down payment options as well.
Which Mortgage Program is Best for You?
How can you know which program is best fro you unless you know what all of your optoons are? How can you possibly know if the loan offcier you are speaking to even knows or has access to other programs you may be eligible for?
If you contact me, or call (951) 215-6119, we’ll figure out which programs you are eligible for, then I can prepare a side-by-side comparison of several low down payment (and down payment assistance) options you are eligible for and explain the differences.
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