First-time Home buyers, Look into a 3% Down Conventional Loan

First-time home buying* just got easier and more affordable. There is a new type of loan out there that may be of interest. It’s the 3% down conventional loan, and it’s doing wonders for first-time home buyers like you.

*I have to preface this blog post with a strict definition of what a “first-time home buyer” is. Only those who have not owned any property in the past 3 years are considered a “first-time home buyer” and qualify for this type of loan. If two people are buying the home, only one needs to be a first-time home buyer.

Most recently, the loans most first-time home buyers have been selecting was either a 5% down conventional loan or an FHA loan requiring a 3.5% down payment. Now that the 3% down conventional loan is available buying a home has become a little easier and more affordable for first time buyers.  So, if you’d like to own a home, you owe it to yourself to see if you qualify.

First of all, what is the 3% down conventional loan? This loan is a better alternative to both an FHA loan (where you put 3.5% down) and a standard 5% conventional loan because it allows you to qualify with a lower down payment and it makes your mortgage insurance (aka MIP or PMI) much cheaper. Plus, once you reach 20% ownership of the property, it drops off without being forced to refinance.

I consulted with Chad Trease, Senior Loan Officer at Prime Lending for more information.

“This is a great alternative loan through the Fannie and Freddie guidelines,” he explains. “This loan may open the gates for more homeowners.”  Plus, according to Forbes, the 3% down payment conventional mortgage financing “does not handcuff borrowers to mortgage insurance forever like FHA MIP does.”

First-time homeowners still have the ability to utilize a 5% down conventional loan or an FHA loan to purchase their home but the 3% down loan maybe a better option. In addition, both the 5% and 3% down payments can be gifted if need be, allowing for even more flexibility. 

First-time home buyers, now that buying a home is more possible than ever before, it’s time to contact me to schedule a consultation and learn more. Join me and Chad at our first-time homebuyers seminar on February 26 at 6:30pm at 11005 Metcalf Ave. in Overland Park to get even more helpful information about buying a home.

Fannie Mae Changes Guides on Gift Funds

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, even 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.

Phone: 913.568.7355

Email: tohlde@kw.com

Website: www.toddohlde.com 

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:

Phone: 913.951.3786

Email: jgriffiths@stonegatemtg.com

Website: Jim Griffiths

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