WHENEVER SOMEONE IN THE MORTGAGE OR REAL ESTATE INDUSTRY starts talking about making it easier for folks to buy homes, people start getting nervous, thinking, “Here we go again.”

So before I even begin, let me put this qualifier out there: Steps are being taken by the industry to make homeownership more widely available and easier for many who may have found it difficult if not impossible to buy a home. But this is not a return to the absolute stupidity of the early 2000s.

Fannie Mae and Freddie Mac announced on Monday new programs that will allow qualified borrowers to purchase or refinance homes with as little as a 3-percent down payment. (Note that I said qualified borrowers.) The two agencies are offering different programs with slightly different qualifications and similar benefits. Loan terms will be offered up to 30 years and all loans will be required to be fixed rates.

Fannie’s program requires that at least one borrower be a first-time buyer, defined as someone who has not owned a home in the last three years. To insure that they are prepared for the responsibilities of owning a home, borrowers will be required to go through pre-purchase counseling.

Freddie’s program is directed at low- to moderate-income folks and does not contain a first-time buyer qualifier. Freddie also will require borrowers to complete counseling.

Both Fannie and Freddie have long used electronic underwriting as a basis for approving borrowers. These new programs will be underwritten to typical underwriting standards — in other words, borrowers must document that they have sufficient income to afford the monthly payments, and that they have demonstrated responsible credit practices.

Key to these programs is that they will require private mortgages. The aim here is to put the first level of risk on private companies, thereby protecting the agencies, and ultimately the taxpayers, from losses. However, since the whole idea is to help folks, the amount of private mortgage insurance required is being kept low, and therefore affordable.

Home ownership has been proven to be the primary economic staircase by which people rise to moderate and even high levels of economic security. I can see these programs being used in a couple of different ways to really help folks become successful homeowners — and, ultimately, to achieve greater economic security.

First of all, for many, lowering the barrier to 3 percent will be enough to get them into a home for the first time. The Federal Housing Administration has offered a 3.5-percent down payment for many years, so that part is not new. However, the mortgage insurance associated with FHA is prohibitively expensive, and FHA loan limits are lower in many areas than FNMA and FHLMC. The monthly payment savings between the private mortgage insurance required by FNMA and FHLMC and the insurance that FHA requires could result in as much as a $50,000 difference in home value.

Secondly — and here is the big win — Freddie’s program is designed to help low- and moderate-income buyers get into their first home. Down payment assistance programs are typically tailored for the same low- to moderate-income buyer. So, if lenders pair CalHFA down payment assistance with a Freddie 97-percent loan, the buyer gets a much more affordable payment and ultimately will qualify for more home than they could have with FHA. Using this combination, a qualified family could get into their first home with as little as $1,000.

Finally, whenever I discuss rates or specific loan programs, my compliance folks begin to get a bit nervous. So please know that this column is intended for information purposes only; any reference to specific programs or lending scenarios is for illustrative purposes only and is certainly not an offer to lend.

Guy Benjamin (CAL BRE License #01014834, NMLS 887909) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or guyb@fairwaymc.com.height=”150″ />

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