The return of the 3% downpayment

Posted on January 26, 2015 by Rory Mark Schmer from South Florida

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The return of the 3% downpayment

NEW YORK – Jan. 26, 2015 – A growing number of lenders are reducing downpayment requirements so that borrowers can contribute 3 percent or less of a home's purchase price and still qualify for financing. In addition, some lenders have waived mortgage-related fees, and others are allowing downpayments from outside sources, such as the buyer's family.

Most lenders target the new deals at buyers with stellar credit scores and steady income who have not been able to save enough for a substantial downpayment. Some types of low-downpayment mortgages have been around for a long while.

The Federal Housing Administration (FHA) insures home loans with down payments as low as 3.5 percent, and it's lowering the annual mortgage-insurance premiums charged on new mortgages starting today.

The lower-downpayment trend accelerated after Fannie Mae and Freddie Mac recently lowered the minimum downpayments they will accept from 5 percent to 3 percent, driven by a White House campaign to make homeownership more affordable to a wider group of Americans.

Jack McCabe, an independent housing analyst in Florida, cautions that borrowers will likely incur higher costs over the life of the loan, including steeper interest rates.
Source: MarketWatch (01/26/15) Andriotis, AnnaMaria
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