A new Fannie Mae plan requires only 3% down

May 02, 1993|By James M. Woodard | James M. Woodard,Copley News Service

A relatively new home mortgage plan allows buyers to acquire a home with a down payment of only 3 percent of the purchase price. And other qualification terms are more flexible than required with most conventional home loans.

The plan is attracting an increasing number of buyers and lenders throughout the country, according to executives with Fannie Mae -- the Federal National Mortgage Association -- the organization that structured the mortgage plan in an effort to make housing more affordable to more Americans.

Fannie Mae is the nation's largest investor in home mortgages. It buys existing mortgages from primary lenders. The local lender can then use these funds to grant more loans to other home-buying families.

The recently structured Fannie Mae loan plan, called the Community Home Buyer's Program, allows buyers to pay as little as 3 percent cash down payment. But another 2 percent must come from a gift from a family member or another public source, or a grant or unsecured loan from a nonprofit organization.

The borrower can qualify for one of these loans with monthly payments of 33 percent of monthly gross income and a total monthly obligations-to-income ratio of 38 percent. This compares with a standard qualifying ratio of 36 percent.

Generally, homebuyers need less income to qualify for one of these loans than is required for most mort gage loans.

zTC Primary lenders like the plan because it brings more families into the home-buying market. And the loans are readily salable to Fannie Mae.

Fannie Mae planned the loan package to increase homeownership and promote revitalization in minority and low- and moderate-income areas across the country.

To assure that the underwriting flexibilities do not increase risk, borrowers who participate are required to attend pre-purchase home-buyer education sessions, covering such matters as applying for a mortgage, budgeting household expenses and shopping for and maintaining a home.

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