Will 3% Down Mortgages Assist California Home Buyers?

Good news may be here in 2015 for CA homebuyers as Fannie Mae and Freddie Mac will be launching mortgage programs with down payments as low as 3%. These new mortgages are targeted at homebuyers with good credit but not enough cash for traditional loans.

These new loans, announced in December, reverse a trend of tighter lending standards by the government-sponsored mortgage giants since their taxpayer-financed bailouts. The programs allow only fixed-rate loans on single-family homes used as a primary residence.


“We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers,” said Andrew Bon Salle, executive vice president for single-family underwriting, pricing and capital markets at Fannie Mae.

The programs could give a boost to first-time home buyers, who have largely stayed on the sidelines of the housing market rebound. First-time buyers this year made up the smallest share of the housing market in 27 years, according to the National Assn. of Realtors.

A Federal Reserve survey released in August found that 45% of renters delayed buying a home because they couldn’t afford a down payment.

Fannie and Freddie purchase about half of all new home loans from banks and package them into securities for investors. But lenders still have to make the loans, and some remain skeptical of any 3% down-payment program.

Fannie Mae’s program, which began in December, is available to anyone who has not owned a primary residence for three years. Private mortgage insurance will be required making the monthly payments higher than buyers with a traditional down payment.

Freddie Mac’s program, called Home Possible Advantage, will begin in March of 2015. It is open to anyone who meets certain requirements, but first-time home buyers must participate in a home ownership education and counseling program.

What do you think of these new 3% down loans? Are they good for CA home buyers or are they setting a dangerous precedent?  We’d like to hear from you.

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