Good Morning!
The buzz on the street is true- there is a 97% loan we can offer our future clients! We are hoping by this communication, it helps to answers any questions there may be on this program moving forward.
Fannie Mae 97% LTV Options
FOM will accept standard Purchase and Limited Cash Out Refinance transactions at the higher LTV with the following criteria:
Purchase and Limited Cash Out Refinances:
- 620 minimum credit score
- DU Approve/Eligible required. Manual Underwriting is not eligible on this program
- All loans must be fixed-rate, standard balance, and 1-unit principal residences (No Manufactured Homes)
- Reserves will be determined by DU but may be funded by eligible gifts
- Non-Occupying Co-Borrowers not allowed
- 35% MI coverage required
- Reduced MI not permitted
- LPMI not permitted
Purchase ONLY:
Only one of the borrower(s) must be a First-Time Home Buyer (declaration M in Section VIII of 1003 must be noted accordingly).
Borrower minimum contributions must be met.
Borrower(s) with a 620-659 FICO MUST attend a First-Time Homebuyer Education course.
Refinance ONLY:
FNMA
Standard Limited Cash Out Refinances of existing Fannie Mae loans must be evidenced. The FOM Sales Partner must do their due diligence before disclosing a new origination at this 97% LTV to limit future customer service issues. Verification of currently owned Fannie Mae mortgages can be provided through the following means:
- The current lender’s servicing system
- The current servicer’s system (if the lender is not the servicer)
- Fannie Mae’s Loan Lookup tool OR
- Any other source as confirmed by the current lender
Fannie Mae’s Loan Lookup Tool: https://knowyouroptions.com/
Once confirmed, the FOM Sales Partner must ensure that Fannie Mae owns the existing mortgage by indicating Fannie Mae in the “Owner of Existing Mortgage” field in the online loan application. In the Desktop Originator® (DO®)/DU User Interface), this field is located on the Additional Data screen in the Full 1003 layout.
FHLMC
The primary advantage to Freddie Mac’s version of this 97% program is that the current loan does not have to be owned by Freddie Mac or Fannie Mae. Unfortunately, we do not have enough investors to deliver to that offer this high of an LTV on the FHLMC platform. FHLMC loans at 97% are ineligible.
FAQ
Is the 97% LTV loan the same program as the previously retired 97% LTV Program?
No, the 97% LTV is different from the “Conventional 97” program which was retired in 2013. This version is really more forgiving toward new home buyers and allows homeowners to refinance to today's historically lower mortgage rates.
Can first-time buyers use the 97% LTV program to purchase a home?
Yes. The 97% LTV can be used by first-time home buyers. It can also be used by repeat buyers.
What is the definition of a "first-time home buyer"?
A first-time home buyer is defined as a person who has not owned a home in the last three years. A borrower who previously owned a home is still a first-time home buyer if the ownership was greater than three years ago.
Is the 97% LTV program the same as the MyCommunityMortgage (MCM) program?
No, MyCommunityMortgage (MCM) is a totally different program. The MCM program is aimed at certain members of the community like teachers and firefighters. MCM also offers a more flexible underwriting standards than what is evidenced in the 97% LTV program.
Are down payments larger than 3% allowed with the 97% LTV program?
Yes, there is no limit to the size of the down payment with the 97% LTV program. With a down payment of 5% or more, however, a borrower would no longer qualify for the 97% LTV program.
What is a borrower contribution and how much is it for this program?
A borrower contribution is the total amount contributed by the borrower(s) to the Down Payment, Closing Costs, Financing Costs and Prepaids/Escrows of the proposed transaction. The borrower minimum contribution of the 97% LTV program is 3%.
What mortgage products are available via the 97% LTV program?
The 97% LTV program allows mortgage applicants to use the 30-year fixed rate mortgage only.
What is the loan limit on the 97% LTV program?
The 97% LTV program is limited to loan sizes of $417,000 or less. Loans in high-cost areas are permitted, but loan sizes remain capped at local conforming loan limits.
What is the maximum number of units for a home under the 97% LTV program?
The 97% LTV program is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes. 2-unit homes, 3-unit homes, and 4-unit homes are not eligible.
Are homes which are not Primary Residences eligible under the 97% LTV program?
No, the 97% LTV program is for primary residences only. Vacation/second homes and investment properties are not allowed.
Is private mortgage insurance required with the 97% LTV program?
Yes, mortgage applicants are required to pay private mortgage insurance (PMI).
Can I refinance a non-Fannie Mae loan with Fannie Mae under the 97% LTV program?
No, Fannie Mae requires loans refinanced under the 97% LTV program to be “Fannie Mae-backed”.
Are cash-out refinances allowed with the 97% LTV program?
No, the 97% LTV program does not allow cash-out refinances.
How is this program better than a non-Conventional Product?
Before this new 97% LTV program, most homeowners with less than 5-10% equity in their homes would need to apply for an FHA refinance to help reduce their monthly payments. Unfortunately, FHA loans come with permanent, high-cost mortgage insurance. Mortgage insurance on the 97% LTV program automatically drops off when the loan balance reaches 78% of the last appraised value. At the end of the day, the 97% LTV program ends up being more cost-effective.
Why was this 97% LTV Program rolled out?
Research performed by the GSEs supported there was no significant difference in default rates between homeowners with 10% equity and those with only 3%. This is one of the primary reasons why the LTV/CLTV/HCLTV restrictions were loosened up.
How does this 97% LTV Program help ineligible HARP homeowners?
Published HARP rules state that homeowners who opened a mortgage on June 1, 2009 and later are not eligible. The 97% LTV program has no such rule for ownership requirements.
ALL OF US BECOME BETTER, WHEN EACH OF US DOES BETTER.
For more info Reach out to Jason Randall
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