Changes for 3% Down Conventional Loans

 In Different Types of Loans, Qualifying for a Mortgage

There are some big changes coming soon for 3% down conventional loans.  For all conventional loans submitted to Fannie Mae’s underwriting system on or after July 20, 2019, or to Freddie Mac’s underwriting system on or after July 28, 2019, the income limits will be lowered dramatically. 

Here’s what that means for you.

HomeReady and Home Possible Loans

Currently, Fannie Mae’s HomeReady loans and Freddie Mac’s Home Possible loans are the most popular option for people looking to get a mortgage with just 3% down.  Beginning July 20, 2019, the income limits (the maximum amount a borrower can make) are being reduced. At the moment, some properties have no income limit (it depends which census tract the property is in) and the rest of the properties are limited to 100% of the Area Median Income (AMI).  In the Denver Metro area, the AMI is $89,900.  

Beginning on July 20, the income limit for all properties, regardless of the census tract, is being lowered to 80% of the AMI.  That means in the Denver area, the new income limit will be $71,920.

If you earn more than $71,920, you will no longer be able to get a HomeReady or Home Possible 3% down loan.  That’s not the greatest news for many borrowers because HomeReady loans and Home Possible loans have lower interest rates and lower mortgage insurance rates than regular conventional loans.

Counting Income

On the bright side, we only have to count the income you need to qualify for the loan when comparing it to the income limit.  So, if you earn $100,000, but $30,000 of that is from overtime, bonuses, commissions, etc., and you qualify for the loan based on your base pay of $70,000, you can still get a HomeReady or a Home Possible loan.

Fannie Mae and Freddie Mac will still have regular conventional loans that only require 3% down, but they do not have the same lower rates and lower mortgage insurance rates that HomeReady and Home Possible loans have.

Bottom line is that not as many people will qualify for lower rate and lower mortgage insurance rate conventional loans that only require 3% down, but a lot of people still will.  There are also other loan options for people with only a small down payment. Contact us now to see if you qualify for one of them. It’s free and easy, and we’re always ready to help.

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