Lately, I’ve been getting quite a few questions from homebuyers about the major changes to Fannie Mae (FNMA). For starters, allow me to define Fannie Mae: Fannie Mae is a government-sponsored enterprise that primarily buys mortgages from lenders for cash or pools them and sells them as mortgage-backed securities to investors on the open market.
So what’s changing about FNMA? Like most industries, nothing stays the same for long—and real estate is no exception. There are many changes coming along that will affect homebuyers in 2014 and one of those is a new FNMA rule with gift down payments.
In the past, most homebuyers have not had the opportunity to use 100% “gift funds” (a financial gift from a spouse or other blood relative,
one’s employer) for their down payment.
So many used the 3% down Conventional (97 LTV) or 3.5% down FHA option,
100% gift (96.5 LTV) options when purchasing a home or they would use a
conventional loan with 5% down. But because of major changes to the real estate
market, FNMA is now allowing homebuyers to use gift funds to make their 5% down
payment on a conventional loan, making the 5% (95 LTV) option much more
attainable, particularly for first-time home buyers.
So what does this mean for homebuyers exactly? A whole lot of opportunity. In order to get an understanding of this change, I talked with Jim Griffiths, a Mortgage Advisor at Stonegate Mortgage.
“There really is no downside to this change for borrowers,” explains Jim. “While the 3% down option went away, this allows more home buyers access to conventional lending programs. It’s perfect for first-time homebuyers who may not have had enough time to save up enough of their own cash reserves to make a down payment. They can really use this to their advantage.”
The table below will help homebuyers further understand this change and see the minimum borrower contribution requirements for transactions that contain gifts:
As Griffiths stated, with this change, homebuyers are putting more skin in the game, not to mention more investment in the market. The message here is that investors want to see more “skin in the game” even though it may be 100% gifted funds.
“Bottom line, if someone can help you with your 5% down payment, you now have that option,” says Griffiths. “Conventional lending provides a much less expensive option from a mortgage insurance perspective, which lowers the overall monthly payment. In the long run, it can also be cheaper than an FHA loan. My recommendation is that if it’s available, take advantage of it.”
If you would like to take advantage of this new loan opportunity and begin the home buying process, please contact me today to schedule a private consultation.
Or, if you have more questions regarding the new Fannie Mae guides, or if you want to inquire about qualifying for a home loan, please contact Jim Griffiths:
Website: Jim Griffiths
Want more tips and breaking news about the housing market? Stay posted on my Facebook page or contact me.