Updated 2016 Fannie Mae Down Payment Guidelines
2016 Fannie Mae Down Payment Guidelines On Home Purchases
There are Fannie Mae Down Payment Guidelines that home buyers need to follow when getting conventional loans. Down payments on home purchases are required and down payment on conventional loans are different for owner occupied properties, multi-unit properties, second homes, and investment homes. Fannie Mae Down Payment Guidelines also have different loan to value requirements when it comes to rate and term refinances and cash-out refinance mortgage on conventional loans.
Fannie Mae Down Payment Guidelines now offer 3% down payment on conventional loans for first time home buyers. Those who are not first time home buyers, need a 5% down payment on a conventional loan home purchase. Fannie Mae used to require that a home buyer needed to have 5% of their own funds when getting a gift for the down payment on a high balance conventional loan with less than 20% down payment. Now, that is no longer required and all of the down payment on high balance conventional loans can be gifted for a single family home that is the home buyer’s primary residence.
Fannie Mae Mortgage Loan Limits
There are three mortgage loan limits categories. Conforming loan limits, high balance loan limits, and jumbo loan limits.
Conforming mortgage loans need to conform to Fannie Mae and Freddie Mac mortgage lending guidelines. The maximum conforming loan limit is capped at $417,000 for conventional loans.
High balance mortgage loans are considered conventional loans between $417,000 and $625,500. Fannie Mae and Freddie Mac determines high balance loan limits depending on the county and state the property is located. Many of the counties in the state of California is considered high cost areas and high balance mortgage applies to those areas due to the high cost of housing.
Jumbo mortgage loans do not meet Fannie Mae and Freddie Mac mortgage lending guidelines so they are called non-conforming mortgage loans. Jumbo mortgage loans are any mortgage loans that are over the $417,000 conforming Fannie Mae and/or Freddie Mac loan limits and can go as high or higher than $3 million.
Fannie Mae Down Payment And Home Equity Guidelines
Down payment on a home purchase with a conventional loan is mandatory and the down payment on a home purchase is different for primary single family homes, investment homes, second homes, and multi-unit family homes. The down payment requirements or the amount of equity a homeowner has is based on the loan to value also referred to as LTV. The loan to value will compare the down payment on a home purchase or the equity state with the loan amount that is getting financed.
For example, if a home buyer would be putting $40,000 down payment on a $200,000 home purchase, that home buyer will have a loan to value of 80% LTV due to having 80% of the home purchase being financed by the mortgage lender. 2016 Fannie Mae Down Payment Guidelines on high balance mortgage loans are as follows for 30 year fixed rate conventional mortgage loans:
- Primary home purchase and or rate and term refinance requires 95% loan to value for single family homes, 85% loan to value for two unit properties, and 75% loan to value on three to four unit properties.
- For primary cash-out refinance conventional mortgage loans, 80% loan to value is required on single family homes, 75% loan to value is required for two to four unit homes.
- For second home purchase and rate and term refinance conventional mortgage loans, 90% loan to value is required for single family homes, and 75% loan to value is required on cash-out refinance mortgage loans on second homes.
- Fannie Mae requires a 85% loan to value on an investment property purchase that is a one unit property. Two to four unit investment property purchases require 75% loan to value.
- Fannie Mae requires 75% loan to value on a rate and term refinance of an investment property that is a one to four unit building. Fannie Mae requires a 75% loan to value on a one unit investment property cash-out refinance mortgage loan and requires 70% loan to value on a two to four unit cash out refinance mortgage loan on an investment property.
Fannie Mae has different requirements for adjustable rate mortgages on conventional loans with regards to down payment and home equity required. We will cover Fannie Mae Guidelines with adjustable rate mortgage on a separate article.
Fannie Mae Multiple-Financed Properties Guidelines
Fannie Mae categorizes multi financed properties differently. If a person owns 5 to 10 financed properties, the down payment requirement for a second home purchase or one unit investment home property purchase is 25% down payment for a fixed rate conventional mortgage loan and 35% down payment for an adjustable rate mortgage conventional loan.
A person who has 5 to 10 financed properties and want to do a purchase or rate and term refinance loan on an investment property, they will be required to put a 30% down payment on a fixed rate conventional loan or 70% loan to value and if they choose an ARM, then a 40% down payment will be required or 60% loan to value.
For property owners with 5 to 10 financed properties, cash-out refinance loans are not permitted. Only rate and term refinances are allowed. Minimum credit score requirements for mortgage loan borrowers with 5 to 10 properties are 720 FICO or higher.