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3% Down Conventional Mortgage Offered to First-time Home Buyers

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 Townhomes

Ineligible 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.

3% down loan first time home buyer

In Tampa Bay, It’s 43% Cheaper To Buy Than Rent

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.

Written by Rae Catanese, Realtor

Licensed Realtor since 2002, Tampa Bay’s own Rae Catanese regularly gives expert advice and insider tips about the Tampa Bay real estate market via her blog, The Tampa Real Estate Insider. If you are thinking of buying or selling a home in the Tampa, St. Petersburg or Clearwater areas-then this blog is for you. I typically post articles once a week. To make sure you don’t miss my newest posts, you can subscribe here! Have a real estate question? Email me here!

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