Freddie’s 3% Down Payments Start Next Week

Freddie Mac will begin offering mortgages with down payments of only 3 percent — the first time they’ve been this low on the GSE’s loans in nearly five years — starting March 23. The move is expected to make more credit available to entry-level borrowers.

“By launching our 3 percent down payment mortgage now, at the start of the spring homebuying season, lenders will be ready to serve qualified working families who are ready to buy and keep the recovery going,” Dave Lowman, executive vice president for Freddie Mac’s single-family business, writes on its Executive Perspectives blog.

Fannie Mae began insuring 3 percent down payment mortgages in December.

The Federal Housing Finance Agency, the conservator of Fannie Mae and Freddie Mac, recently said it wanted to make it a priority to “work to increase access to mortgage credit for creditworthy borrowers,” according to FHFA’s 2015 Scorecard for Freddie Mac. Tight credit conditions and high down payment requirements in recent years have been blamed for sidelining potential home buyers and causing a sluggish housing recovery.

Besides 3 percent down payments, Freddie Mac’s Our Home Possible Advantage Program, which is aimed at supporting first-time buyers as well as low- and moderate-income borrowers, is allowing no minimum from borrowers in contributions. That means parents or relatives now can cover 100 percent of the down payment through gifts.

Source: “Advantage: Home Buyers,” Freddie Mac (March 9, 2015)

Denver poised as a top 10 market

While first-time home buyers’ presence in the housing market has been subdued in recent years, some metro areas are poised to soon see an increase in home buying from the millennial generation, according to new research from the National Association of REALTORS®.

“Limited job prospects, student debt, and flat wage growth have combined with tight credit conditions and low inventory to price millennials out of some of the top cities such as New York and San Francisco,” says Lawrence Yun, NAR’s chief economist. “However, NAR research finds that there are other metro areas millennials are moving to where job growth is strong and home ownership is more attainable. These markets are well-positioned to soon experience a rise in first-time buyers as the economy improves.”

To identify those soon-to-be booming millennial markets, NAR factored in current housing conditions and housing affordability, job creation, and population trends in 100 metro area across the country that have a large millennial presence to determine the best markets for aspiring millennial home buyers. Seven of the 10 metro areas were in the Midwest and West. The top markets identified (listed in alphabetical order) are:

• Austin, Texas
• Dallas
• Denver
• Des Moines, Iowa
• Grand Rapids, Mich.
• Minneapolis
• New Orleans
• Ogden, Utah
• Salt Lake City
• Seattle

NAR also identified the following markets with high potential for attracting millennial home buyers:

• Madison, Wis.
• Nashville, Tenn.
• Omaha, Neb.
• Raleigh, N.C.
• Washington, D.C.

“Millennials will eventually settle down, trade their roommates for spouses and want to raise a family,” says Steve Brown, NAR’s president. “As long as median income continues to support purchasing power in most areas, the demand and opportunity will be there for millennials to purchase their first home with guidance and insights from a REALTOR®.”

Source: National Association of REALTORS®