Mortgage lenders are making it easier get approved for a mortgage.
Fannie Mae and Freddie Mac have announced a new low-downpayment mortgage program which requires just 3% down at closing, joining other government agencies in offering loans which require little or no money down.
In offering a 3 percent down-payment program, Fannie Mae and Freddie Mac bring yet another financing option to today’s home buyers wanting to minimize their downpayment. The new 3% down payment program is available for both detached and attached single family homes such as condos and townhomes.
FHA loans remain to be among the most popular low-down payment options in today’s market. FHA loans require down payments of 3.5% and provide for flexible underwriting standards. Home buyers with less-than-perfect credit may find FHA loans to be more cost-effective than loans via Fannie Mae or Freddie Mac; and simpler to get approved, too. FHA also offers opportunity for borrowers to include the financing of renovation costs in the purchase loan with the same 3.5% down payment. This allows buyers to purchase lower priced homes which may need upgrades or repairs.
It is also important to note the interest rate for your chosen loan product. FHA mortgage rates are typically 25 basis points (0.25%) below rates for a comparable conventional loan. You want to make sure that between the principal, interest rate, PMI (private mortgage insurance) and any other fees that you are making the best choice for your loan product. Your loan officer should be able to give you guidance with this comparison.
VA loans are another popular option. Available to veterans and active members of the military, VA loans allow for 100% financing and never require mortgage insurance to be paid.
VA mortgage rates are typically 37.5 basis points (0.375%) below rates for a comparable conventional loan. VA loans are backed by the Department of Veterans Affairs.
Lastly, there’s the USDA loan. USDA loans are guaranteed by the U.S. Department of Agriculture and, although they’re sometimes called “Rural Housing Loans”, USDA loans can be used in some suburban locations in the Chicago area, too.
USDA loans offer very low rates and allow for 100% financing. They also require just a small mortgage insurance premium as compared to other low- and no-downpayment loans.
Today’s home buyer has plenty of financing options. In today’s environment of low interest rates and lower down payments, 2015 may be your year to purchase a new home.
If you are looking to buy or sell in the Chicago area market, please give me a call.
Millie C Lumpkin
EXIT Strategy Realty
Phone: (312) 217-5644