First-time Columbus home buyers may find mortgages easier to obtain, thanks to changes in lending guidelines by Freddie Mac and Fannie Mae. The new mortgage programs allow down payments as low as 3%, and will broaden homeownership opportunity for low-to-moderate income borrowers.
While Freddie and Fannie do not issue mortgages directly, they are the 900-lb gorillas in the secondary mortgage market. Namely, they purchase mortgages from lenders and provide security to the market. They also set many of the common underwriting rules that are applied to borrowers.
The new mortgage programs could provide welcome relief for creditworthy borrowers who were regulated to the sidelines. Each entity has its own version, with Freddie Mac launching the “Home Possible Advantage” Program in upcoming weeks. This is a conventional mortgage allowing 3% down and a debt-to-income ratio up to 43%. It is designed with first-time borrowers in mind, and requires completion of a home buyer education program.
Fannie Mae’s 3% down payment mortgage is similar, and rollout of the program is underway. It is available to borrowers who have not owned a home in the past three years. Borrowers will also be able to refinance under the same program, and roll-in $2,000 of the closing costs.
In both cases, mortgage insurance premiums will be required. However, Freddie and Fannie mortgage insurance premiums are expected to be priced lower than FHA premiums. All told, the new changes may bring a competitive environment to entry-level mortgages.
It should be mentioned that the bulk of Freddie and Fannie underwriting guidelines are not changing; credit score thresholds and affordability standards will remain intact. Documentation requirements will not be any less onerous. This is not a return to the carefree days of subprime lending. Instead, it’s a practical adjustment that helps qualified borrowers overcome the down payment hurdle.
Have questions about qualifying for your mortgage? Let us help you! We can refer you to reputable mortgage lenders in Central Ohio. As your Exclusive Buyer’s Broker, we serve your best interests at all times. Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest.
Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!
Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!
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Buyer’s Resource Realty Services
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7100 North High Street, Suite 204, Worthington, Ohio 43085
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