Freddie Mac Kills 1 Percent Down Payment Mortgages #homeownership #investment #realestate

Source:  Housing Wire

Mortgage financing giant Freddie Mac will begin this fall to tighten restrictions on low down payment mortgages that allow borrowers to only contribute 1 percent of the home's purchase price.  Borrowers will now be required to come up with at least 3 percent in order to then receive any contribution from a lender.

Freddie Mac and Fannie Mae started the low down payment offerings in 2014 by rolling out 3 percent down mortgages.  Some lenders - like Quicken Loans and Guaranteed Rate - then rolled out mortgages with down payments as low as 1 percent.  With those programs, the lender "granted" 2 percent of the down payment to the borrower and added that to the borrower's 1 percent contribution.  They then arrived at the 3 percent needed to qualify for a Fannie or Freddie low down payment mortgage.  Under the new guidelines, however, such ways to arrive at 3 percent down payment will no longer be permitted.

Gifts or grants from the seller must not be funded through the mortgage transaction, such as differential pricing in rate, discount points, or fees for individual loans.  Lenders are no longer allowed to roll the 2 percent gift back into the loan, under the revised guides.

The new updates take effect Nov. 1.

Check out the full story here:
https://www.housingwire.com/articles/40809-freddie-mac-kills-1-down-payment-mortgages

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