Changes and New Guidelines

Recent changes to Fannie Mae and Freddie Mac are designed to ease some of these difficulties. Both lenders are now authorized to offer loans with down payments of just 3 percent. The programs, however, are not identical. The low down-payment mortgages from Fannie will be available only to people who are defined by the Federal Housing Finance Agency as first-time homebuyers, meaning they have not owned a home in the last three years.

Freddie’s program offers low down-payment options to repeat buyers with low or moderate incomes. Freddie Mac also offers no-cash-out mortgage refinancing and requires all first-time borrowers to go through home ownership counseling. Fannie Mae’s guidelines requires counseling for low and moderate-income buyers and allows borrowers to count cash gifts as financial reserves. Fannie also offers a limited cash-out option to cover closing costs.

New guidelines set by the Federal Housing Administration will lower the amount of interest paid by consumers on its loans. The FHA insures mortgages with down payments as low as 3.5 percent and had raised the cost of its premiums to 1.35 percent in 2013. Instead, borrowers will face premiums half a percent lower at 0.85 percent. The change may not put much more cash in the pockets of borrowers – it will save them about $25 on a 30-year, $100,000 mortgage – and will not affect loan origination. The change could bring in some new borrowers, but other low-cost options are available and the savings are so minimal that they probably won’t be enough to sway a potential homebuyer.

The Dodd-Frank Wall Street Reform and Consumer Protection Act goes into effect this year. The rule means that qualified mortgages administered by the FHA loans issued after Jan. 21 are required to have substantially equal payments. They won’t be eligible for post-payment interest charges or balloon payments. According to HUD, these charges cost homebuyers an estimated $449 million in 2012.