Primary Residence Conventional Loan Programs
There are two types of minimum down payment mortgage conventional loan programs for owner occupant primary homes. The 5% down payment program and the 3% down payment conventional loan program. The 3% down payment conventional loan program is geared towards first time home buyers or home buyers who did not own a home for the past three years. Fannie Mae allows the 3% down payment conventional home purchase loan program to first time home buyers only. Freddie Mac will allow home buyers who have not owned a property in the past three years to be eligible for the 3% down payment Conventional Loan Program. Sellers concessions are allowed for both the 3% down payment conventional loan program and the 5% down payment home purchase conventional loan programs. The maximum amount of sellers concessions allowed on primary and second home financing per Fannie Mae and Freddie Mac mortgage lending guidelines is 3% sellers concession.
3% Down Payment Conventional Loan Programs
To qualify for the 3% down payment conventional loan program, the mortgage loan borrower needs to have a minimum of 3% down payment seasoned for at least 60 days in their bank account. Gifts may be allowed by a family relative, depending on the lender, but the donor needs to provide a gift letter and the lender needs to see that the gift funds have been seasoned in the donor’s bank account for at least 30 days and show the transfer leaving the donor’s bank account and into the account of the receiver via bank statements.
Credit Scores Required
The mortgage loan borrower needs a minimum credit score of 620 FICO and needs an automated approval by Fannie Mae’s automated underwriting system. The maximum loan amount is $417,000 and additional reserves are required if the mortgage loan borrower owns additional properties.
5% Down Payment Conventional Loan Programs
The 5% down payment conventional loan program is available for mortgage loan borrowers with a credit score of a minimum of 620 FICO. The mortgage loan borrower needs to provide proof of having a minimum of the 5% down payment in their bank account for a period of 60 days. Some mortgage lenders might allow the mortgage loan borrower to get a gift from a relative or family member but then the donor needs to provide proof of the funds via providing the mortgage lender seasoned funds for the past 30 days and the money transferring the donor account into the receiver account as well as provide a gift letter. As with the 3% down payment conventional loan program, an automated approval via Fannie Mae’s automated underwriting system is required with an approved eligible. Reserve requirements may be required for those who own other rental or investment properties. Maximum loan sizes on 5% down payment purchase conventional loan programs is $417,000.
Financing Requirements On Vacation Homes
On vacation homes and second homes, a minimum of a 10% down payment is required along with a minimum credit score of 620 FICO. Those seeking a vacation home must meet debt to income ratio requirements of a minimum of 45% or an approved eligible via the automated underwriting system. Again, the maximum loan size for a conventional loan for vacation homes and second homes are $417,000.
Financing Requirements On Investment Homes
For those mortgage loan borrowers seeking investment home conventional loans, the maximum loan to value allowed is 85% with a minimum credit score of 620 FICO. Those mortgage loan borrowers with two or more properties wanting to purchase a third or fourth home, are considered investment home loan borrowers so the investment conventional loan program will apply. Mortgage lenders will also require three months reserves on investment properties financing. One months reserves is equivalent to one month of principal, interest, taxes, and insurance or commonly called PITI. Investment home buyers can also get sellers concessions by the investment home seller. The maximum amount of sellers concessions allowed on investment homes is 2% per Fannie Mae and Freddie Mac mortgage lending guidelines.
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