Fannie Mae used to offer 3% down conventional loans until a couple years ago….they went away with several changes due to the number of foreclosures, etc.  They are coming back!

There are banks that currently offer special programs with 3% down, usually for first time homebuyers and most of those programs are serviced by the individual bank.  State or county first time homebuyer programs also frequently offer 3% down conventional financing, such as MN Housing's first time homebuyer program.  This program is based on the My Community Fannie Mae program.  

Fannie Mae has come out and said they are going to offer 3% down again, but we do not have a start time yet.  It sounds like it will have credit score requirements and possibly income limits such as the My Community Program had.  This is one of Fannie's answers to helping the housing situation.  

Currently you can put 5% down and it can be a gift, which has helped many people buy new homes.  Conventional mortgage rates may be slightly higher than FHA, but the mortgage insurance is usually significantly lower, so the overall payment is lower.  Plus with conventional financing, the mortgage insurance will go away once you have 20-22% equity in your home.  FHA's mortgage insurance never goes away unless you sell or refinance your home.  

Fannie Mae and Freddie Mac are trying to come up with ways to help buyers finance homes and this is one of their answers.  Coming up with the down payment is frequently the most difficult part of home financing.  As we find out more about this new program, I'll update everyone!

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, NMLS#150953 - Email - Website

About Leslie Vanderwerf

Currently a Branch Manager for American Mortgage and Equity Consultants, Inc., it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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