A Guide to 3% Mortgages

Posted on January 25, 2024

New homeowners are seeing mortgage interest rates have more than doubled since 2021, making the dream of home ownership with the traditional down payment of 20% seem like a bridge that is very far. However, there are many options and programs that don’t require 20% down. Some loan programs now allow for a much lower down payment, requiring as little as 3 percent in cash. This development significantly eases the burden for homebuyers, especially first-timers.

Understanding 3-Percent Down Mortgage Options

These low down payment mortgages are often part of special programs, typically targeting first-time homebuyers or those who haven’t owned a home in the recent past. Here’s a closer look at these options

1. Conventional 97

  • Backed By: Fannie Mae
  • Key Features: Only 3% Down Required; Down Payment Can Be A Gift, Grant, Or Other Assistance.
  • Qualifications: Must Be A First-Time Homebuyer Or Not Have Owned A Home In The Past Three Years.
  • Homebuyer Education Course Required For All First-Time Buyers.
  • Minimum Credit Score Of 620.
  • The Home Must Be A Primary Residence.
  • Conforms To Loan Limits (E.G., $766,550 For A One-Unit Property In Most Areas).
  • Additional Info: Requires Private Mortgage Insurance (PMI) Until 20% Equity Is Reached.


2. Fannie Mae’s HomeReady Program

  • For: A Wider Range Of Properties, Including Multi-Family Units.
  • Qualifications: Open To Those Who Haven’t Owned A Primary Residence In The Past Three Years.
  • Credit Score Minimum Of 620.
  • Income Cannot Exceed 80% Of The Area’s Median Income.
  • At Least One Unit Must Be The Owner’s Primary Residence.
  • Unique Feature: Counts Rental Income Towards Income Requirements; Down Payment Can Be Entirely From Gifts Or Assistance.


3. Freddie Mac’s HomePossible Program

  • Distinctive Feature: Allows Non-Occupying Co-Borrowers To Contribute To The Down Payment.
  • Qualifications: Homeownership Education For First-Time Buyers.
  • Credit Score Of 660 Or Above.
  • Income Limits Apply.
  • Must Live In The Home As A Primary Residence.
  • Additional Info: PMI Required Until 20% Equity Is Achieved.


4. HomeOne by Freddie Mac

  • Target Audience: First-Time Homebuyers And Those Looking For Cash-Out Refinances.
  • Qualifications: At Least One Applicant Must Be A First-Time Homebuyer.
  • Usable Credit Score Required.
  • Property Must Be A Single-Unit Primary Residence.
  • No Restrictions: No Income Or Geographical Limitations.
  • Other Low-Down Payment Options
  • FHA Loans: Minimum 3.5% Down. Available To A Broader Audience, Including Those With Lower Credit Scores.
  • USDA And VA Loans: No Down Payment Required, Specific To Rural Area Borrowers (USDA) And Military Personnel (VA).

The Path to Homeownership in 2024

Despite the daunting landscape of high interest rates and challenging savings goals, is made smoother with these innovative low down payment mortgage options. Whether you’re a first-time homebuyer or someone looking to re-enter the housing market, these programs offer a ray of hope and an opportunity to achieve the dream of owning a home. Fill out our easy pre-qualifier on our website and we can see what program best fits your needs!

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