Our office has a long history of representing first-time homebuyers. The number of first-time homebuyers is growing; in the Northeast, nearly 36% of buyers were first-timers in 2015. One of the most daunting aspects of the process for a first-time buyer is obtaining a mortgage.
Fortunately, there are a number of financing opportunities available to first-time homebuyers including loan products for low down-payments. First-time homebuyers often struggle to put together a significant down payment. Although incomes have risen by about 10% for “millennials” (people aged 18 to 34) over the last decade, that increase has not kept pace with the increased cost of entry-level properties.
It’s therefore good news that there are a number of new loan products to help buyers without large down payments. These high “loan-to-value” loans (i.e. mortgages requiring less than five percent down) are a growing share of the home-buying market, comprising 23 percent of all purchase originations through September, 2015.
Here are some loan products available for low down-payment buyers:
- Fannie Mae:In 2014, Fannie Mae developed a way for homebuyers to purchase a home under Fannie Mae’s standard offering or its MyCommunityMortgage product with a three percent down payment if at least one co-borrower is a first-time buyer.
- Freddie Mac:Freddie Mac’s 3% down mortgage product for single-family homes – called Home Possible Advantage – was introduced in March 2015 (5% down on two-unit properties). Home Possible mortgages are appealing because they offer stable monthly mortgage payments with fixed-rate mortgages, flexible closing cost funding options and reduced mortgage insurance coverage levels for LTV ratios greater than 90 percent.
- State of New York Mortgage Agency (SONYMA): SONYMA also offers products for eligible first-time homebuyers through several mortgage programs, including the Homes for Veterans program, Remodel NY and Achieving the Dream. Each program offers competitive interest rates, low down payments, down payment assistance and no prepayment penalties. SONYMA offers its programs through a network of participating lenders throughout New York State.