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Home / Blog / Mortgages / 97% Conventional Financing is Back

97% Conventional Financing is Back

January 6, 2015 By Mary Catchur

97 Percent Conventional Financing is Back
97% Conventional Financing Returned December 13, 2014.

Just over a year ago, Fannie Mae (FNMA) discontinued its loan program allowing borrowers to purchase a home with just 3% down, thereafter requiring a minimum of 5% down to qualify for conventional financing.

Basic Qualifications

Effective December 13, 2014, FNMA will once again offer 97% conventional financing, as long as at least one of the borrowers on the loan is a “first-time homebuyer”. A first-time homebuyer will be defined to include borrowers who have not owned a home within the last 3 years.

According to FNMA executives, their goal is to help additional qualified borrowers gain access to mortgages. The program will be available for owner-occupied primary residences and can be used either to purchase or refinance a property. Requirements for underwriting and documentation will follow the same guidelines as existing Fannie Mae loan programs. Consistent with other loans with a loan-to-value ratio greater than 80%, these loans will also require mortgage insurance.

Refinancing

Other low down payment options available to borrowers are FHA, VA and USDA financing. Each of these options has advantages and disadvantages and should be evaluated in light of the borrower’s particular circumstances.

FHA Financing

While FHA financing can be a good option for borrowers looking for a low down payment loan, there are circumstances in which the borrower may be better off with a conventional loan, especially now that the 3% down payment option is back. In general, mortgage insurance premiums are lower under FNMA conventional financing. And they can be eliminated once the loan has been paid down to 78% of the original value of the home, while most FHA loans will require mortgage insurance throughout the life of the loan. On the other hand, borrowers with lower credit scores and higher debt to income ratios may still find that FHA is the best option for them.

VA Financing

VA loans are still a very good option for veteran’s to purchase with zero down payment. There are also no monthly mortgage insurance payments on VA loans.

USDA Financing

The US Department of Agriculture (USDA) offers a zero down loan as well. In order to qualify for a USDA home loan, borrowers must meet income eligibility requirements and the property must also be designated as eligible for this financing on the USDA recently revised maps. If the borrower and property are eligible, this can be an excellent option for homebuyers.

More Information

For more information on these products and an analysis of which may best fit your needs, or the needs of your customers, contact Marimark Mortgage at 866-910-8020.

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Filed Under: Mortgages Tagged With: 97% Financing, Conventional Mortgage

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

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