Recently, three key mortgage financing entities – Freddie Mac, Fannie Mae and the Federal Housing Administration (FHA) – announced new mortgage programs with lower down-payment requirements. The goal of all three agencies is to make homeownership possible for more buyers. Additional details have emerged on these programs to help homebuyers decide if these programs are right for them.
Freddie Mac and Fannie Mae have introduced programs generally targeted to first-time homebuyers who have good credit but are unable to come up with a sizable down payment to buy their home. Potential homebuyers may qualify for a down payment as low as 3% but they will have to pay for mortgage insurance, which is calculated as a percentage of the total loan amount. The more you put down, the less of a percentage you have to pay. Buyers who can put at least 20% down do not have to pay for mortgage insurance.
Fannie has also introduced a new program called MyCommunityMortgage which is available to lower and moderate income people based on where they live and has some flexibility with credit requirements. Borrowers don’t have to be first-time homebuyers and can put down as little as 3%. Freddie Mac is introducing a similar program called HomePossible in March.
The Federal Housing Administration program offers a down payment as low as 3.5%, slightly higher than Freddie and Fannie, but is more flexible with credit scores. MyCommunityMortgage, HomePossible and the FHA program all require mortgage insurance for down payments less than 20%.
All of these programs can make homeownership more accessible and homeownership comes with many benefits, including the ability to build equity, possible tax advantages and having a place to call your own. In some cases it can also be more affordable than renting, especially when living in a home for the long term (see our post on renting vs. buying). Still, there are many factors to consider when it comes to one of the most important financial decisions you’ll make in your lifetime, especially in the area of mortgage financing and the amount of money you’ll need. Other factors that need consideration are the down payment and when you’re ready to buy a home. This article in the New York Times does a great job in outlining the new mortgage programs, the advantages of each and what your anticipated costs might be.
If you’re considering homeownership, contact any of our experienced and reliable real estate agents. Our team at Showcase Properties offers comprehensive services throughout Ocala, Marion County and the surrounding areas, helping you every step of the way from finding that perfect home through to closing.