Conventional 3% Down Mortgage Financing
Fannie Mae and Freddie Mac now allow 3% down mortgage financing with a Conventional home loan. Until recently, conventional loan options were not available unless you could make a minimum 5% down payment. That was until the recent relaxing of guidelines and creation of Fannie Mae's HomeReady and the Freddie Mac HomePossible Advantage program. Through those offerings, buyers now have 3% down mortgage financing options. These programs are available for both first-time buyer and repeat buyers as well.
3% Down Mortgage Highlights
- Own a home with as little as 3% down
- Gifts for down payment - can also include closing costs and prepaid items
- Credit scores as low as 620 for 97% financing
- Save on mortgage insurance (PMI) - not required for the life of the loan
- Seller can contribute up to 3% towards closing costs and prepaids
- Loan amounts available up to Conforming limit of $424,100
- * Ask about our option with No Monthly MI
How Do I Know If I Qualify for 3% Down Mortgage Financing?
There are a few different conventional financing options with a 3% down payment, so that's good news when it comes to flexibility when qualifying. Fannie Mae and Freddie Mac limit this program to only be available for a primary residence.
Otherwise, the requirements for the 3% down mortgage options will be the similar to any other. The credit scores are acceptable down to 620 and debt-to-income ratios (DTI) will be capped at 45%.
The great news is that the loan amounts for the 3% down mortgage programs are more flexible when comparing to FHA. Effective in 2017, $424,100 is the new conforming loan limit.
Depending on the specific 3% down mortgage options, the area median income limit may be a restriction. These income limits apply to both the Fannie Mae HomeReady program and the Freddie Mac HomePossible 3% down mortgage programs in particular. In many areas, there are no income restrictions at all. One of our loan specialists will determine any income limits for a specific property address and census data for the area.
Is a Conventional 3% Down Mortgage right for me?
The 3% down mortgage options have many advantages, but it's not the perfect solution for everyone. There are things like monthly payments and cash flow to consider. Not to mention the overall down payment, closing costs, interest rates, mortgage insurance, etc. How do you compare apples to apples?
The way that we help our clients is by creating detailed side-by-side comparisons of the loan options that are available. When looking for a 3% down mortgage, we will often compare with FHA financing since both have similar down payment requirements. The goal of this analysis is to determine the total cost of each loan over the time horizon that you plan on living in or owning the home. If this is something that would be helpful for you, click here to receive a custom loan comparison.
Depending on your specific situation, there are other alternatives to the 3% down mortgage to consider. For example, FHA (Federal Housing Administration), VA (Department of Veterans Affairs), or USDA (US Department of Agriculture).
Next Steps to a 3% Down Mortgage Loan...
When you decide to move forward, feel free to give us a call. A loan specialist will help you assess your goals and take the steps in the home loan process to find out if you qualify and are pre-approved for the 3% down mortgage financing.
Have more 3% down mortgage loan questions or interested in starting the home loan process? Always feel free to call our office at 972-499-0454 to speak with one of our home loan specialists.