Home prices are on the rise around the country, and down payments are naturally rising with them.
But Lisa Tartar of Fannie Mae’s Community Lending Team told an audience at the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., that homebuyers have somewhere to turn.
Tartar detailed Fannie Mae’s “Home Ready” program, which offers options for buyers who need flexibility with down payment and income qualification.
Home Ready offers conventional loans with down payment requirements as low as 3 percent and credit score requirements as low as 620. Despite this flexibility, Tartar said the program offers competitive pricing on par with other conventional products, as well as a range of options for the source of a down payment.
Unlike other low-down payment programs, Home Ready’s 97 percent loan-to-value option has cancellable mortgage insurance. That represents a potential savings for consumers compared with loans backed by the Federal Housing Administration but without the additional restrictions that accompany an FHA loan.
Tartar boasted that the program may factor in rental and boarder income when calculating debt-to-income ratios and even allows non-occupant borrowers to sign onto the loan.
Like most mortgage programs, Home Ready does have limitations. First and foremost, Tartar told the audience that the program is limited to owner-occupied units and is not available for investment properties. Tartar also noted that the program is subject to geographic-specific income limits that are tied to the census track.
Fannie Mae has an online tool available, however, that makes it easy to find out if a property is eligible and what income limits (if any) apply.
In her comments, Tartar spoke to what Realtors® describe as the “20 percent down myth,” the widely-held belief that a 20 percent down payment is required to purchase a home. She noted that according to Fannie Mae research, survey respondents believe an average 12 percent down payment is required to purchase a home.
This finding falls in line with the National Association of Realtors® Aspiring Home Buyer Profile, which found that that 87 percent of non-owners believed a down payment of at least 10 percent or more is necessary to purchase a home.
For many buyers, that 20 percent figure is still a magic number. NAR found in its September 2016 HOME survey that plenty of consumers still believe 20 percent down is required to purchase a home, with consumers over the age of 65 and under the age of 35 to be the most likely to believe the myth.
Beyond the Home Ready program, Tartar reminded Realtors® in attendance that assistance programs are available across the country to help individuals put forward a down payment. She specifically highlighted the online “Down Payment Resource” which, while not a Fannie Mae-approved product, tracks roughly 2,400 down payment assistance programs across the country.
Tartar highlighted this online tool with a reminder that Realtors® have an important role to play helping homeowners – particularly first-time and low- to-middle income homebuyers – achieve the dream of homeownership. She said it’s the Realtors®’ job to keep homebuyers informed about their options and help guide them towards the programs that can help them the most.
“You are that trusted advisor,” Tartar said. “You’re the expert and they’re looking to you.”