The big news of the week was that our mortgage giants have started a new program called “Home Possible Advantage” in which qualified homebuyers will only need 3% in order to purchase.

This puts them in a great position to compete with FHA for Buyers who want to minimize the liquid assets that are putting into an owner-occupied property.  Those who have discussed this subject with me will remember that I feel the FHA’s decision over the summer to make their mortgage insurance a permanent part of the loan was a real misstep as it will force refinancings in the coming years and thereby shift interest rate risk onto the Buyers (you used to be able to shed the mortgage insurance once you gained enough equity in the property).

This new program is only available to owner-occupiers of single family homes.  I’ve had questions about how this will affect the overall market; it will increase the number of potential Buyers, especially younger ones who do not have family to help with a down payment.

The debt to income ratios remain however, so purchase prices will remain firmly tied to incomes, so I don’t expect it to increase appreciation significantly.

The new 97% LTV loans will allow homeowners to purchase properties for just 3% down, a reduction from their previous requirements of 5%. Although this is only a small drop, it is the hope of these government-sponsored enterprises that by decreasing the loan amount required, more individuals will be able to purchase a home.

via Breaking News: Fannie Mae and Freddie Mac Drop Some Down Payment Requirements to 3%.