FANNIE MAE And FREDDIE MAC Update: 97 LTV Conventional Loan

Gustan Cho Associates

97 LTV Conventional Loan Program Is Back:

Fannie Mae and Freddie Mac has just released news that they will bring the 97% LTV Conventional Loans program back which enables qualified home buyers to purchase a home with a 3% down payment versus the current 5% down payment required.  The 97 LTV Conventional Loan program was available prior to 2014 but was discontinued on January 1, 2014.  This is great news for home buyers with good credit and who qualify for a conventional loan but lack the resources for the down payment.  This is a great sign that the two mortgage giants, Fannie Mae and Freddie Mac, want to promote home ownership for Americans and sign that they want to expand credit for folks who want to be homeowners.  Back in October of 2014, FHA released a statement that was finalizing agreements with mortgage companies and lenders that would drastically increase and loosen credit qualifications required by mortgage loan borrowers and giving mortgage lenders added protection on their assets.

3% Down Payment To Qualify For 97 LTV Conventional Loan

The surprising announcement released by Fannie Mae and Freddie Mac now will give the opportunity for home buyers who qualify for a conventional loan and can afford the mortgage payments and housing expenses but lack the needed 5% down payment to be able to only put a 3% down payment to qualify for a 97 LTV Conventional Loan.  The 3.0% down payment requirement for the conventional loan is lower than the 3.5% down payment required for a FHA Loan.

FANNIE MAE 97 LTV Conventional Loan Qualification Requirements

To qualify for the 3% down payment, 97 LTV Conventional Loan program, it is no different than the 5% down payment 95% LTV Conventional Loan program.  The 97 LTV Conventional Loan program mortgage loan applicants need to qualify for the standard Fannie Mae and/or Freddie Mac lending guidelines with regards to eligibility requirements such as credit, income, debt to income ratios, and waiting periods after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale as well as credit risk.

 97 LTV Conventional Loan Lending Guidelines

Many home buyers who can qualify for a conventional currently opt for a FHA loan with the 1.35% hefty FHA mortgage insurance premium due to the lower down payment requirements of 3.5% down payment for a FHA loan versus to the current 5% down payment requirement for a Conventional Loan.  All FHA loan require the mandatory FHA mortgage insurance premium for the life of the FHA loan which is 1.35% annual mortgage insurance premium.  FHA also require a one time upfront 1.75% FHA mortgage insurance premium which is normally rolled into the FHA loan balance.  Any conventional mortgage loan with 80% Loan to Value or higher require private mortgage insurance, however, the conventional private mortgage insurance is a fraction of the FHA mortgage insurance premium and it can be canceled once your property reaches the 80% LTV level.  Now home buyers who qualify for a conventional loan can now qualify with 3% down payment, which is lower than the 3.5% down payment required for FHA Loans.

To qualify for a conventional loan, you need a 620 FICO credit score.  Debt to income ratios are capped at 45% DTI.  There is a mandatory waiting period of 4 years after a bankruptcy, deed in lieu of foreclosure, and short sale.  There is a 7 year mandatory waiting period after a foreclosure.  You need to have been timely on your payments in the past 12 months.  You need an approve/eligible per DU FINDINGS and/or LP FINDINGS per Automated Underwriting System.

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