Lending guidelines are loosening up, and one of the recent places is in minimum down payment requirements. Fannie Mae now allows as little as 3% down payment for first time homebuyers. Here are the general requirements and guidelines:
- Conforming loan amounts only (up to $417,000)
- Must be a first time homebuyer (if you are buying with a spouse or partner, then one of the buyers must be a first time homebuyer)
- Gift funds from family for the down payment and/or closing costs are allowed
- Single family home, condo or townhouse okay – 1-unit only
- Fixed rate only
- Reserves are required per automated approval findings
- 620 minimum FICO, as long as Fannie Mae returns an Approve/Eligible recommendation
There are no income limitations and homebuyer counseling is not required, so the previous 5% minimum down payment for conforming loan amounts is now officially reduced to 3% down.
However, this may not be a make-sense alternative to FHA financing due to high Mortgage Insurance rates. Contact me with specific details for your situation and we can run an apples-to-apples comparison and review the advantages and disadvantages of FHA versus Conventional financing. Besides the total monthly payment as consideration, you may want to review the Mortgage Insurance requirements under both financing options to make the best decision for you and your situation.
