New Mortgage Guidelines Make Buying a Home Much Easier

Buying a new home just got a little easier for some people in the U.S., thanks to new offerings from mortgage giants Fannie Mae and Freddie Mac. The new guidelines do have restrictions, but are aimed at young, first-time home buyers who may not have a large lump sum for a down payment.

Fannie Mae and Freddie Mac announced the proposals for the new mortgage rates in October, but the plans are slated to go into effect in December 2014 and March 2015, respectively. According to the New York Times, the new rate offers home buyers a chance at a very small down payment — a paltry 3%.

This is good news for a number of potential home owners who have been unable to make larger down payments; however, critics of the 3% mortgage say that it could cause a new housing crisis similar to the one that occurred a few years ago, which was caused by easy lending.

Proponents of the 3% mortgage say that it is offering more first-time home ownership to people who would otherwise be unable to buy a house. The Fannie Mae guidelines stipulate that the borrower cannot have owned a home in the last three years, and that the home must be a single unit with a fixed-rate term. Freddie Mac requires potential home owners to go through a homebuying education program. There are also, of course, minimum credit scores for eligibility.

Another part of these programs that alleviates the financial burden of home ownership is that under the Fannie Mae and Freddie Mac 3% programs, home owners are able to cancel their private mortgage insurance premiums when the mortgage drops below 80% of the value of the home.

This is in addition to the savings that homeowners should also look into the reduce the amount they’re paying for homeowner’s insurance. Installing sprinkler systems, smoke alarms, and deadbolt locks can save a home owner up to 20%. There are a number of other different measures to take, but these typically depend on the state the homeowner lives in and the deductibles that the insurer offers.

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