Fannie and Freddie Launch 3% Down Program

Mortgage giants Fannie Mae and Freddie Mac have launched a program called Home Possible Advantage, a conventional mortgage with 3 percent down-payment requirement designed for low-and moderate-income borrowers. The program is expected to expand credit for qualified home buyers who may have been priced out of the market due to higher down-payment requirements.

Home Possible Advantage is a conforming conventional mortgage with a maximum loan-to-value ratio of 97 percent. The program is only available to first-time homebuyers and approved applicants who participate in a borrower education program. Borrowers must still meet standard eligibility requirements, including underwriting, income documentation, and risk management standards. Loans also require private mortgage insurance. Fannie Mae will allow the lower down payment option starting on December 13th for first-time homebuyers and permit refinancing borrowers to reduce equity to 3 percent to cover costs. Freddie Mac will begin offering the program in March.

“Our goal is to help additional qualified borrowers gain access to mortgages,” says Andrew Bon Salle, Fannie Mae executive vice president for single-family underwriting, pricing, and capital markets. “This option alone will not solve all of the challenges around access to credit. Our new 97 LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage.”

The National Association of REALTORS® has applauded FHFA’s efforts to make homeownership more accessible. NAR said in a statement that FHFA demonstrated a “commitment to home ownership by serving creditworthy borrowers who lack the resources for substantial down payments, plus closing costs, with a new 3 percent down-payment program that mitigates risk with strong underwriting. The new program ensures that responsible home buyers will have access to safe, affordable mortgage credit.”

Read FHFA’s statement Here.