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Fannie Mae Making It Easier to Get a 3% Down Loan

Now nearly one year in, Fannie Mae announced changes to its growing low-down-payment program in order to expand access to credit for more borrowers.

HomeReady mortgage replaced MyCommunityMortgage, Fannie’s previous affordable lending product that launched the 3% down program at the end of 2014.

When the 3% down payment first began, it required at least one co-borrower to be a first-time buyer, but with the adoption of HomeReady last August came the option for both first-time and repeat homebuyers to purchase a home with as little as 3%.

Now, Fannie said a further update expands the program to expand access to credit and promote successful homeownership.

Here are the key changes from the announcement:

  • Allowing the occupant borrower on a HomeReady loan to own other residential properties
  • Removing the requirement for homeownership education for limited cash-out refinance transactions
  • Eliminating the requirement for landlord education for HomeReady loans secured by two-, three, or four-unit properties (homeownership education is still required)
  • Deleting references to post-purchase early delinquency counseling requirements to align the post-purchase counseling requirements for all Fannie Mae conventional mortgage loan types as recently described in Servicing Guide Announcement SVC-2016-05
  • Accepting homeownership education from Community Seconds or Down Payment Assistance Program (DPAP) providers as long as the providers are HUD-approved counseling agencies and the first mortgage loan involves a Community Second or DPAP.

All of these changes are effective immediately.

Fannie Mae also outlined in its release several other underwriting and eligibility updates that will be available for HomeReady borrowers later in 2016.

Future changes include:

  • Allowing a maximum loan-to-value ratio greater than 95% up to 97% on limited cash-out refinance transactions in DU, per standard underwriting guidelines, including a requirement that the existing mortgage be owned or securitized by Fannie Mae to be eligible.
  • Expanding current HomeReady eligibility for buydowns and adjustable-rate mortgage loans to include three-to four-unit properties.
  • The following additional benefits exclusively for HomeReady loans where borrowers have received customized one-on-one assistance from HUD-approved nonprofit counseling agencies in accordance with the requirements outlined above:
  • If the HomeReady loan is delivered with Special Feature Code 184, the lender will receive a loan-level price adjustment credit of $500
  • When the lender indicates in DU that the HUD-approved one-on-one assistance was completed, that information will be considered a compensating factor for those loan casefiles with debt-to-income ratios greater than 45% up to 50%.

Official details on these changes will be announced in a future Guide update and DU Release Notes, FannieMae said.

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