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Condos4Tenants: FNMA’s Low-Downpayment Programs
Community Lending mortgages are designed specifically for low- and moderate-income borrowers. To ensure that these loans are, in fact, used to assist this group in achieving homeownership, Community Lending products generally are limited to those whose income is no greater than 100 percent of the area median income (AMI) where the home is located.
There are ten mortgage options under Fannie Mae's Community Lending products. These are: Fannie Mae's Community Home Buyer's Program (SM), 3/2 Option®, Fannie 97®, Community Seconds® Mortgage Loans, Magnet 3/2® Employer-Assisted Housing Mortgage Loans, Magnet 5® Employer-Assisted Housing Mortgage Loans, Fannie Mae's Community Home Buyer's Program Start-Up Mortgage®, FannieNeighbors®, Lease Purchase Mortgage Loans, and Community Land Trust Mortgage Loans.
Specially designated high-cost areas and communities targeted for neighborhood revitalization are among the exceptions to this income limit. Income limits may also exceed 100 percent of the area median income when a housing finance agency provides the mortgage financing by using tax-exempt mortgage revenue bond funds or when a government agency uses federal, state, or local subsidy funds that have legislatively imposed income limits;
in these cases, the income limits designated by such agencies shall control. State of California, borrowers may earn up to 140 percent of the area median income;
Fannie Mae's Community Lending product line can help eliminate the two primary barriers to homeownership for low- and moderate-income people -- lack of down payment funds and qualifying income. Community Lending products share many key benefits and flexible mortgage and underwriting features, such as:
Lower down payment requirements,
Lower qualifying income,
Expanded closing-cost assistance,
Lower cash reserve requirements, and
Acceptance of nontraditional credit histories.
In most cases, Community Lending loans require that borrowers have incomes no greater than 100 percent of the area median income (with exceptions made for specially designated high-cost areas and communities targeted for neighborhood revitalization). Income limits may also exceed 100 percent of the area median income when a housing finance agency (HFA) provides the financing by using tax-exempt mortgage revenue bond funds, or when a government agency uses federal, state, or local subsidy funds that have legislatively imposed income limits.
Fannie Mae's Community Home Buyer's Program (CHBP), our signature Community Lending product for low- and moderate-income home buyers, is available to home buyers who earn no more than 100 percent of the area median household income. Income limits can be removed if the home is located in certain designated underserved areas using FannieNeighbors®. This 5 percent low down payment mortgage is a 15- to 30-year fixed-rate mortgage with 33/38 debt-to-income ratios. No cash reserves are required. Home-buyer education is required, but can be waived in certain circumstances.
3/2 Option® is a low down payment mortgage that offers all the underwriting flexibilities of Fannie Mae's
Community Home Buyer's Program but requires less funds directly from the home buyer. With the 3/2 Option, borrowers provide 3 percent of their down payment from their own funds, and the remaining 2 percent can come from a gift from a family member, a grant or unsecured loan from a nonprofit organization or government agency, or (under certain conditions) secured financing from a government agency or nonprofit organization. Debt ratios of 33/38 are allowed on 15- to 30-year fixed-rate mortgages. No cash reserves are needed at closing. Home-buyer education is required, and post-purchase early delinquency counseling is recommended.
FannieNeighbors® is a nationwide, neighborhood-based mortgage product created to increase homeownership and revitalization in minority and low- and moderate-income communities. Income limits are removed for borrowers financing homes located in designated central cities, in eligible low-income or minority census tracts, and in HUD-designated underserved areas. All other CHBP underwriting flexibilities apply to FannieNeighbors mortgages. Home-buyer education is required but can be waived if a borrower meets certain conditions. For a list of eligible FannieNeighbors areas, call Fannie Mae at 1-800-7FANNIE. San Francisco is eligible for FannieNeighbors
Community Lending products generally limit a borrower’s income to 100 percent of the area median income (AMI) where the home is located. Specially designated high-cost areas and communities targeted for neighborhood revitalization are among the exceptions to this income limit. San Francisco is eligible, as a high-cost area.
Fannie 97® is a 3 percent, low down payment mortgage, which is ideal for the home buyer with enough income to handle monthly mortgage payments but who has difficulty accumulating cash for the down payment. The Fannie 97 mortgage features a loan-to-value (LTV) ratio of 97 percent. The product is limited to home buyers earning up to 100 percent of the area median income, with exceptions for certain high-cost areas and where the loan is made in connection with a federal, state, or local government program, where income limits are legislatively imposed.
Borrowers may choose either a 25-year term with underwriting ratios of 33/36 or a 30-year term with standard underwriting ratios of 28/36. Only one month's mortgage payment reserves are required. Face-to-face prepurchase home-buyer education and post-purchase early delinquency counseling are also required.
Community Seconds® Mortgage Loans encourage partnerships among lenders, government agencies, and nonprofit organizations while increasing affordability for borrowers. Home-buyer education and counseling is required. Community Seconds has three elements:
a Fannie Mae Community Lending mortgage loan (e.g., CHBP, 3/2 Option, or Fannie 97) that is
originated by a Fannie Mae-approved lender, serves as a first mortgage, and is sold to Fannie Mae;
a subsidized second-lien mortgage -- also called a soft second -- that is often deferred, forgiven, or
carries no interest or very low interest (typically provided by a federal, state, or local government agency,
nonprofit organization, employer, or private foundation) and may also be supplemented by a gift, loan, or
grant; and a low down payment from the borrower.
Lease-Purchase Mortgage Loans enable nonprofit organizations to purchase homes that they then lease to lower income families with an option to buy. This gives low- and moderate-income families time to save the down payment needed to purchase the home. Part of the rent payment is escrowed into savings for the purpose of accumulating the down payment and closing costs. Fannie Mae purchases the long-term, fixed-rate, first mortgages with the nonprofit as the borrower and permits a one-time assumption by the renting families when they are ready to buy the homes. Home-buyer education is required. The Lease-Purchase Mortgage Loan can be combined with Fannie Mae's CHBP, Fannie 97, 3/2 Option, FannieNeighbors, and Community Seconds to increase affordability.
CRA Portfolio Transactions have been expanded due to the undertaking of a targeted approach to purchase or securitize CRA loans under more flexible credit and pricing terms. By focusing on payment history and the creditworthiness of the homeowner as compensating factors for underwriting flexibilities, Fannie Mae is able to work with key community groups and lenders to create tailored housing opportunities for low- and moderate-income people and communities.
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