US Eases Mortgage Lending for First Timers
The federal government has announced that it will offer mortgages with a down payment as low as 3% in order to help first time homebuyers increasingly shut out of the housing market. Standard down payments are about 20% of purchase price, a major obstacle to young buyers with solid credit history but limited cash reserves.
Skeptics of the plan, which the government first announced in October, see it as reminiscent of lending practices that helped fuel the subprime crisis. But in addition to credit standards, the proposal includes underwriting restrictions, mortgage insurance requirements and counseling aimed to lessen the odds of defaults.
Fannie Mae will roll out its My Community Mortgage program this week. It's available to first-time buyers with a credit score at or above 620. The other big government lender, Freddie Mac, will introduce its Home Possible Advantage mortgages in March. The New York Times notes that first-time buyers currently make just 29% of home sales, well below the historical 40% average.
