Currently the minimum down payment on a Fannie Mae Conventional purchase loan is 3% of the purchase price. However, as of November 16th, 2013, Fannie Mae will be eliminating the 3% down payment program and instead require a minimum of a 5% down payment.
Now, this is only a 2% increase in the minimum down payment for a conventional loan, but this certainly will hurt certain potential homebuyers who are looking to purchase a new home.
FHA home loans will still allow for a 3.5% minimum down payment, but the mortgage insurance costs on FHA mortgages generally make them a more expensive option for potential homeowners. As we have covered in past articles, FHA loans currently come with a 1.75% upfront mortgage insurance cost and 1.35% annual mortgage insurance cost, which now can never be removed for the life of the loan.
On the other hand, conventional home loans do not have any upfront mortgage insurance costs, have options to eventually remove the mortgage insurance and generally offer lower annual mortgage insurance costs throughout the life of the loan for borrowers with decent to good credit.
While there are still many good programs available for potential homeowners looking to purchase, it is important to be aware of this change that will be increasing down payments for Fannie Mae conventional loans in Mid-November.
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