Following months of talk and speculation, both Fannie Mae and Freddie Mac announced on Monday they will begin allowing qualifying first-time borrowers to purchase homes with just a 3 percent down payment. By lowering the down payment down to 3 percent, leaders from the GSEs and the Federal Housing Finance Administration hope to increase homeownership and particularly household formation by offering loans to those who can afford mortgages but lack resources to make a 20 percent down payment plus closing costs.
Freddie Mac has announced the launch of Home Possible Advantage, which is an affordable, conventional mortgage with a maximum loan-to-value ratio of 97 percent to qualified low- and moderate-income borrowers. Home Possible Advantage mortgages can be used either to buy a single unit property or for a "no cash out" refinance of an existing mortgage, and they are available as 15-, 20-, and 30-year fixed rate mortgages. Likewise, Fannie Mae is now offering mortgage loans with a maximum 97 percent LTV ratio to qualifying first-time homebuyers.
In its monthly National Housing Survey released Monday, Fannie Mae found attitudes about the current state of the housing market ranged from flat to pessimistic in November after an October marked by more hopeful responses. In the year ahead, 44 percent of consumers polled in November's survey predicted further home price gains, unchanged from October, while 6 percent anticipated declines, down just slightly from the previous report. The average home price change expectation was 2.6 percent, turning down from 2.8 percent in October.