KIRO Radio's Tom Kelly digs deep into the Puget Sound real estate market
Real Estate

Fannie ponders limit on 3 percent down payments

Mortgage giant Fannie Mae might limit its purchases of mortgages that require a minimum down payment of 3 percent, according to The Wall Street Journal.

Even after lending standards tightened in recent years, Fannie Mae has never stopped accepting purchase of 3 percent down payments. The loans have become less common in recent years, but are reportedly starting to increase, prompting Fannie Mae to revisit its position. Many lenders stopped offering such loans because they weren't able to obtain mortgage insurance for those loans.

Fannie Mae-and Freddie Mac-require that any loans that have less than a 20 percent down payment have mortgage insurance or a "credit enhancement."

Freddie Mac stopped backing mortgages with 3 percent down payments several years ago. It now requires a minimum of 5 percent down.

Some analysts expect the changes being considered by Fannie will not be disruptive to the mortgage market. The Federal Housing Administration will still continue to insure loans with 3.5 percent down.

"An awful lot of people who have only got 3 percent down would be advised to save another 2 percent. That's an old hard-headed answer, but it's true," Lou Barnes, a mortgage analyst told The Wall Street Journal.

Higher insurance premiums that borrowers have to pay on a mortgage with a 3 percent down payment versus one with a 5 percent down payment may warrant "waiting six months or a year to save up the extra down payment," Barnes said.

Top Stories

  • Eying the Prize
    A dominant win over Arizona has the Seahawks eying the Super Bowl

  • History of Violence
    The gunman who fatally ambushed two NYC police officers had a long criminal record
ATTENTION COMMENTERS: We've changed our comments, but want to keep you in the conversation.
Please login below with your Facebook, Twitter, Google+ or Disqus account. Existing MyNorthwest account holders will need to create a new Disqus account or use one of the social logins provided below. Thank you.
comments powered by Disqus
Listen to the show
Hear Real Estate Today on KIRO Radio
Join Tom Kelly every Sunday at 9am on KIRO Radio to talk Puget Sound real estate.

Sign up for breaking news e-mail alerts from
In the community
Do you know an exceptional citizen who has impacted and inspired others?
KIRO Radio and WSECU would like to recognize six oustanding citizens this year. Nominate them to be recognized and to receive a $2,000 charitable grant.