A new 3% down conventional mortgage will be offered to first-time home buyers, but there’s a catch!
First, let’s break down what is considered a first-time home buyer.
Fannie Mae considers a first-time home buyer someone who has not owned a home in the past three years. For instance, if you and your spouse apply for a mortgage, only one borrower must not have owned a home within the last three years = first time home buyer.
The 3 percent down loans are geared for low to moderate-income buyers, but require borrowers to undergo similar financial scrutiny as in current loan programs, including documented and verified income levels. Only fixed-interest rate, conventional mortgages are considered, and borrowers must get private mortgage insurance.
A mortgage can already be obtained with 5 percent down, but the difference between three and five percent can be the difference of whether a person can buy a home. On a $200,000 home, five percent down would be $10,000. Three percent down is $6,000.
Here are some of the guidelines for the new 3% down conventional mortgage
Approved Properties:
Owner Occupied Only
Single Family Houses
Warrantable Fannie Mae Condominiums
Detached PUD and TownhomesIneligible Properties:
Non Owner Occupied (investment properties)
Manufactured Homes
2-4 Family Units
Family Sale/Identity of Interest
Property Flips (owner must have title for 180+ days)
The downside to the new 3% Conventional Loan:
You will be required to pay “private mortgage insurance.” The PMI is expensive. 1.499% is the rate factor, which works out to a $187.41 monthly increase on your payment for a $150,000 loan amount.
So other than one borrower needing to be a first time buyer by answering no to owning a home within the last 3 years and PMI approval with the above rate, it looks like standard conventional financing guidelines.
The difference between an FHA loan is that on this new 3% down conventional loan you won’t have upfront PMI (1.75% on FHA) and the PMI cost drops after 11 years. This makes it a little better than FHA cost wise, however, the credit guidelines are tougher with conventional.
Still cheaper to buy than rent in Tampa/St. Petersburg:
Trulia’s Rent vs. Buy Study says it’s 43% cheaper to buy than rent in Tampa Bay assuming you are putting 3.5% down and staying in your home for 7 years.
The homeownership rate for young people has been falling, according to Washington, D.C.-based National Association of Realtors. In 2008, 41 percent of purchases were made by first-time homebuyers. In October this year, the percentage had fallen to 29 percent.
To see if you qualify for the first time home buyer 3% down loan, you can fill out our contact form and a mortgage lender offering the new conventional loan will contact you directly.
