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Fannie Mae’s 3% Down Loan – Alternative to FHA

Fannie Mae has a 3% Down (“conventional”) purchase that is a good alternative to FHA, if FHA is unavailable. Fannie’s program caps out at $417,000, while FHA goes to $729,750, and Fannie’s rates are higher than FHA’s for this program.

In addition, the PMI rate for the alternative Fannie Program is 1.15% (the same as FHA’s MI).

The advantages of Fannie’s program are as follows: (1) you can get out of MI faster (when your LTV drops to 80%) while FHA requires MI for 5 years no matter what; (2) Fannie’s down payment is a bit smaller; and (3) you can completely ignore a spouse with too much debt or major adverse credit events (FHA requires you to include a spouse’s obligations whether he is “on the loan” or not).

Overall, however, we still like FHA better because the rates are lower, the loans are assumable, and underwriting is far more flexible.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167