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30-Year Fixed

Low LTV Loans: Magic Number 97

Rates Fall, Housing Inventory Falls, Low LTV Loans get more house for less, no starter homes

How do you buy a $525,000 home with 3% down? It may surprise you to know, there are a couple of ways. As housing inventory continues to shrink (and at an accelerated pace due to COVID), it could not be more timely to know about low LTV loans.

Where’d the Starter Homes Go? 

The low rates dominating our market should provide ample opportunity to grab homeownership goals by the horns, right? Except… What happened to all the houses? In a nutshell, this: the housing shortage began mid-to-late 2019 as rates fell. Rates plummeted in February 2020, causing a mad rush to sign on the dotted line. In the months that followed, countless numbers of city-dwellers and families emerged from their homes (post-apocalyptic feelings lingering) to buy more space. If another lock-down should arise, “We really need to get the kids their own rooms.”

The Magic Number: 97

So, affordable housing is down and the desire to buy is up. What now, you ask? Allow us to introduce you to Fannie Mae’s 97% LTV Programs. Created to promote sustainable homeownership, Fannie Mae is helping buyers make dreams a reality; whether that means acquiring a first home or increasing the budget. Let’s say a buyer is ready to put $15,750 down on a home. What could they afford?

  • 10% down on a $157,500 condo
  • 5% down on a $315,000 townhouse or modest single-family home (if one is available)
  • 3% down on the $525,000 kind of home every buyer dreams of. Ding-Ding-Ding!

HomeReady vs. 97% LTV Standard 

The main difference between Fannie Mae’s two low LTV programs is 1st-time buyer status. Other than that, they have comparable and equally opportune features:

  • Wide variety of housing types are eligible – Condominiums, co-ops, etc.
  • Income eligibility up to 100% AMI – Use Fannie Mae’s convenient lookup tool to determine if you are income-eligible. (AMI = Average Median Income)
  • Generous “source of funds” flexibility – Buyers can use gifted funds for both the down payment and reserves. That’s huge for first-time buyers who have not yet accumulated the necessary wealth to meet reserve requirements.

The More You Know

There is a lot to know about HomeReady and we are here to help. Because we believe in solution-based lending. No, that’s not just some fancy marketing term. It means we believe everyone deserves to own a home they love. You find it, we help you afford it.