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ConventionalFHA • Conventional • Rural Development • VA Conventional Low Down Payment (3%) Loans Until recently, conventional (Fannie Mae/Freddie Mac) loan underwriting guidelines required a minimum of 5% down payment. Furthermore, these guidelines stipulated that the 5% down payment must come from the borrower’s own “seasoned” funds. In an attempt to compete with FHA and other low down payment programs, Fannie and Freddie have introduced two programs that allow the buyer to make a 3% down payment and still be able to qualify to normal conventional underwriting guidelines. With respect to conventional underwriting note that as the down payment decreases, the borrower’s qualifications must increase. There are two variations of the conventional 3% down program. The first, Standard 97, has fairly rigid underwriting parameters but at a lower cost to the borrower. The second, Alt 97, carries an extra discount cost but is more liberal with qualifying standards. One benefit of both variations of this program is that the loan limit is the normal conforming limit of $333,700 (all other low down payment programs have a limit well below this figure). A comparison of significant features follows: Standard 97 Alt 97 The more liberal parameters of the Alt 97 program make it very comparable to FHA parameters with two important distinctions, with the Alt 97 and Standard 97 programs; 1. Credit history must be vastly superior, and 2. Debt to income ratios must be significantly lower than with FHA guidelines. Nevertheless, in cases where the sales price of the home exceeds FHA county limits these two conventional programs are a good alternative. Big River Mortgage
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