Once Again an Option for Home Buyers:
3% Down Conventional Financing Program
There's no doubt about it, Financing has been tighter over the last few years. And, that's as it needed to be. But it's my opinion, that we are beginning to see some movement towards "loosening" of the tight standards that have now become the norm.
One such financing option recently re-introduced, is the 3% Down, Conventional Loan Product. This loan products delivers the opportunity to borrow 97% of a Sales Price or Appraised Value back onto the option menu for Borrowers. First introduced over 2 decades ago when Mortgage Insurance was readily available, this product has been re-introduced now that housing values have stabilized within many housing markets.
Why is this so important? Why discuss this financing option?
First, the timing of this re-introduction couldn't be better.
For those considering entering the market, either for the first time or for "Boomerang" Buyers (those having suffered through a Short-Sale, Bankruptcy, or Foreclosure), this Mortgage product's lower down payment may open up opportunity for them to buy a home sooner than later.
Also, FHA, the 3.5% Down financing program, recently enacted "tightening" measures and costlier guidelines due to their budgetary and fiscal needs. In other words, they are trying to watch their pennies and curb losses.
Over the last few years, FHA has definitely tightened their standards in the Condominium market. Condominium Projects that were once approved, are no longer eligible for FHA-insured financing currently. (See my recent post re: Condos & Townhomes).
Everyone within the real estate and financing industries (plus many unhappy Condo owners unable to sell their Condos) know all too well the impact that the tightened guidelines have had on the marketability of Condominiums. So it's good news that Conventional Financing with as little 3% Down has returned as an option for Buyers ... and on Condominiums, IF certain conditions are met. In other words, the Condo properties and their financing must be considered warrantable (acceptable) and able to be placed with Fannie Mae or Freddie Mac.
While it remains true that Condominium Associations must be healthy enough to qualify in this Conventional Mortgage Program, the availability of this Mortgage Program signals the Buyer's ability to consider more options for Condo Financing. IF financing options become more available for Condominium Buyers, the increased financing flexibility will create higher demand for these properties. As a result, Condominium values will stabilize and improve for thousands of Condo Owners across the U.S.
The good effects will continue to trickle down. As more Condominium Units become "Owner-Occupied" (as opposed to tenant-occupied, vacant, foreclosed, or short-saled), the more healthy Condominium Associations become. And that means Condo Association DUES are once again paid on time. Which of course means the Condo Association BUDGETS are stronger and healthier too. Repairs, upkeep, and more are performed on the properties on time.
All these pluses trickling down also means that Mortgage Lenders will be more likely to approve even more Condominium Buyers seeking financing in the future.
Keep in mind that this 97% financing option still has high standards that must be met.
Here are the highlights of the 3% Down Conventional Financing Program:
- Minimum Credit Score of 680 or greater
- Debt-to-Income Ratio of 43% or less
- Owner-occupied properties only
- No Second-Home or Investment Property purchases
- Borrower(s) own funds. (No Gift Monies allowed)
- Maximum Loan Amount is $417,000
- Requires Mortgage Insurance approval
It's my opinion that right now, Buyers having more property options to view and consider ... and also having more financing options with which those properties can be purchased, is all very good news ...
* Want to know what financing options are available to you? Need to know if you are eligible to Buy or Refinance a home in New Lenox, Will/DuPage County, or elsewhere in Chicagoland? Contact me today! I'll put my 36+ years of mortgage experience and expertise to work on your behalf.
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