Fannie and Freddie Announce Guidelines for 3 Percent Down Payment Mortgage Program
By: Phillip L. Schulman and Christa Bieker
Earlier this week, Fannie Mae and Freddie Mac announced guidelines for a new mortgage program that will allow down payments as low as three percent for some first-time and low-income home buyers. Melvin Watt, director of the Federal Housing Finance Agency which regulates Fannie and Freddie, explained that the new guidelines will “enable credit worthy borrowers who can afford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgage with 3 percent down.”
Fannie Mae and Freddie Mac do not make loans, but instead buy loans from mortgage lenders and bundle them into securities to sell to investors. Fannie and Freddie’s loan guidelines have broad influence in the mortgage-lending market. The program, first announced in October, is designed to expand access to mortgages with low down payments, which Watt has stated is a “much needed piece to the broader access to credit puzzle.”