How Tax Law Will Help Some Housing Markets

By Laura Kusisto | Dec 26, 2017

The tax overhaul is expected to create winners and losers among housing markets across the U.S., dealing a blow to high-cost coastal regions but potentially fueling demand in places in the middle of the country.

The law caps the amount of property and state income taxes filers can deduct, a provision that hits places like New Jersey, New York, Connecticut and California especially hard. It also limits the size of a loan on which homeowners can deduct mortgage interest to $750,000, down from $1 million, which could put a dent in pricey markets.
On the other hand, realtors and economic-development officials in less-expensive states believe they can benefit if the tax-law changes encourage people to reconsider their home address.

“At some point this draws attention to the cost gap in high-cost areas and growing areas with growing resources like Raleigh, Austin and Charlotte,” said Scott Hoyt, a realtor in North Carolina. “That’s going to be a boon.”
At peak impact in the summer of 2019, home prices in Essex and Union counties in New Jersey and Westchester County in New York could all be about 10.5% lower than they would have been without the tax bill, according to Moody’s Analytics. For roughly 80% of counties in the country, the effect of the bill on home prices is likely to be negative, the firm estimates.

But some markets could see a slight boost to their economies and to home prices thanks to the bill, including parts of North Carolina, Alabama, Nebraska, Indiana and Tennessee.

“They don’t get nailed by the elimination of the [state and local tax] deduction, but they do benefit in the change from the standard deduction and some of the manufacturers benefit from the lower marginal rates for businesses,” said Mark Zandi, chief economist at Moody’s Analytics.

Still, Mr. Zandi cautioned, the changes are modest. Even areas that are likely to see an additional increase in home prices are looking at a boost in the 1% range. Overall, the national impact is likely to be negative. “What this is going to do is it’s going to throw a wet blanket on [the housing market]. It’s still going to move forward, but more slowly,” he said.

People are already migrating from high-cost states to lower-cost areas as home prices and rents in large urban centers skyrocket and it becomes easier for people to work remotely. The tax law is likely to accelerate that trend, economists said. Idaho, Nevada and Utah saw the largest percentage growth in population in the country from July 2016 to July 2017, according to U.S. Census data released this month. New York, New Jersey and California, meanwhile, ranked below the top 20 for percentage growth in population.

Economists said the tax impact is likely to be felt more by businesses deciding to expand operations in lower-cost states, viewing local taxes as an even greater hindrance.

“There’s a neon billboard now [and] the critical mass to induce companies to leave, to induce employees to leave. 2018 is going to see a lot of pressure on this,” said Edward McCaffery, a professor of law and economics at the University of Southern California.

The average New York household that itemizes its tax return pays roughly $17,500 in state income and property taxes—well above the $10,000 limit, according to an analysis by Robert Dietz, chief economist at the National Association of Home Builders. A typical California household that itemizes pays close to $14,000 in taxes. Even in slightly less pricey states, such as Illinois, Maryland, Oregon and Vermont, the average taxpayer who itemizes exceeds the new cap.

For some homeowners, the differences can be stark. A top income earner in New York who owns a home in the top-third price tier of the metro area pays more than $23,000 in property and state income tax a year, according to an analysis by Zillow. Meanwhile, an affluent homeowner with an expensive home in Raleigh would pay just over $10,000.

A homeowner in similar circumstances in Chicago would pay about $12,000 in property and state income tax, while one in the same circumstances in Nashville would pay about one-quarter that much.
Scott Mosley, a Redfin real-estate agent in Nashville, said he has one client moving from Chicago who fast-tracked his closing to just three weeks, out of fear he will take a hit on his tax bill next year because of the cap on state and local tax deductions. Tennessee has no state income tax, although it does level a tax on investment income.
To be sure, the tax law is merely likely to nudge those already considering moving to a cheaper state. Most homeowners are likely to make other sacrifices before they uproot their lives over a modestly larger tax bill.

Steve Bellone, county executive of Suffolk County on New York’s Long Island, said he worries the law will hurt the area economically in the form of lower home values and less consumer spending. Long Island has already struggled to retain younger residents.

“The cost of living is high and that’s something we’re always grappling with to try to keep people in the region and keep young people in the region. This is really a devastating blow to all those efforts,” he said.
Felicia Fleitman, a 34-year-old who owns a consulting business, Savvy Hires, that helps companies create internships and apprentice programs, said she and her husband pay about $10,000 on property taxes and another $5,000 on state income taxes for their 1,100-square-foot home on Long Island.

The couple has two children and Ms. Fleitman is pregnant with a third. She said they would make sacrifices such as taking fewer career risks or buying fewer toys for their children, in order to stay in their home close to family and friends.

“At the end of the day, we’re just going to have to figure it out and come up with the money, which means that other things might have to give a bit, which stinks,” she said.

Ohio Tax Payers Lose the Right to Take Disputes to High Court

Channel 9 WCPO Cincinnati
Julie Carr Smyth

COLUMBUS, Ohio (AP) — Ohioans lost the right Friday to appeal disputed tax decisions directly to the state’s high court, a scarcely debated policy change that critics say will have sweeping consequences for businesses, individuals and governments.
The Ohio Supreme Court advocated for and defends the change, arguing it was necessary to lighten its docket of a flood of market-driven property tax disputes and to preserve its role as arbiter of the state’s most significant legal questions.
Administrative Director Mike Buenger said the Supreme Court is intended to deal with categories of cases that are of great statewide public importance or of constitutional magnitude.
“We started looking at these cases because there was concern by the court that many of them presented basic disputes over mathematic valuations and calculations, and often little more than that,” he said. “With limited exception, these cases did not present great questions of statewide importance.”
A court analysis found that only 14 of the 152 appeals of Ohio Board of Tax Appeals decisions the court was compelled to accept in 2014 involved matters of law appropriate for the high court’s attention.
Justices took their concerns to the Ohio Senate, which quietly slipped language into the state budget bill signed in June removing the court’s obligation to accept direct tax appeals — an option since 1939 — and sending them through the appellate courts first.
Business groups pushed back, arguing that sending tax appeals through regional appellate courts would add costs, inconsistency and competitive disadvantages to Ohio’s tax system.
“The impact will be extremely negative. Over time, it will erode the uniformity of the tax code in the state of Ohio,” said Tom Zaino, a Columbus tax attorney and former state tax commissioner under Republican Gov. Bob Taft. “It’s going to be equally bad for government as it is for taxpayers.”
Zaino said his business tax clients often have more than one location and eliminating direct Supreme Court appeals will lead to decisions that are applicable in only one part of the state, to some but not all of a business’ properties or to one competitor but not another.
Some opponents contend the court overreacted to a rare spike in cases to erase a nearly 80-year-old taxpayer right.
The Board of Tax Appeals, which arbitrates local tax disagreements, issued a whopping 8,165 decisions in 2013, which placed such a burden on resources that the board launched an online filing system to handle the load, said executive director Kathleen Crowley.
“The market just wasn’t supporting the valuations that were at one time a particular number and then, years later, not that number,” she said. Total decisions dropped to around 6,500 in 2014, to 4,500 in 2015 and to less than 2,500 last year.
As appeals made their way to the Supreme Court, the same spike surfaced. Court figures show board decisions appealed to the high court rose from 55 in 2013 to 152 in 2014, fell to 106 in 2015 and then to 69 last year.
Opponents who lined up against eliminating direct appeals included the Ohio Chamber of Commerce, the Ohio Society of CPAs, the National Federation of Independent Business, the Manufacturing Policy Alliance and the Ohio Association of Realtors.
Citing fears over cost increases, venue shopping and inconsistency brought on by the change, the groups urged lawmakers to remove the Senate-added language. When that failed, they lobbied Republican Gov. John Kasich to veto it, again without success.
Matthew Chafin, chief legal counsel for the Ohio Department of Taxation, said Ohio was unusual among states to offer a direct appeal to the high court in tax cases and he believes the state judicial system is equipped to address any issues that arise with the switch.
“It’ll work fine for us,” he said. “It may take another couple steps in dealing with appellate courts and trying to get your case in front of the Supreme Court, but I guess I am not of the opinion that the sky is falling over this.”
Buenger notes that a high court review of any decision of the tax appeals board can still be requested, and those involving a legal matter of statewide significance may be taken up at justices’ discretion.
Time will tell whether the system affects Ohio’s tax climate score as set by the Council on State Taxation.
Fred Nicely, the group’s tax counsel, said the national group is watching.
“That could lead to a lot less consistency across the state in terms of how tax issues are addressed,” he said. “And so that is somewhat of a concern. What was really nice was at least when you had the Ohio Supreme Court addressing these cases, you knew that was the law of the land across all of Ohio.”

Tour de Force: Don’t Make These 10 Huge House-Hunting Mistakes

By Cathie Ericson | Oct 5, 2017

You’ve been thinking about settling down and buying a home for a while now, and you finally think you’re ready. It’s time to tour some digs!
But hold up—you need a game plan. House hunting is about more than popping into a few open houses and picking the one you like best. In fact, there’s a science to it: A smart search means you’ll save time, money, and your sanity during the rest of your home-buying process.

So before you hit the trail, make sure you’re aware of some classic mistakes to avoid. We promise—it’ll mean happy hunting from here on out.
Related Articles
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5 Things Real Estate Agents Wish You Knew About Buying a House
Don’t Budge: 7 Compromises You Should Never Make When Buying a Home
1. Not arming yourself with a mortgage pre-approval
Nothing screams “I’m not really serious” like going to look at houses without being pre-approved for a mortgage, says Sam Harris, an agent with Massada Home Sales in Brooklyn, NY.
That’s because a seller is unlikely to entertain an offer without a pre-approval. And in hot markets, that means you can kiss your chance at a promising property goodbye—there are plenty of other buyers with pre-approvals in hand.
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In addition to improving your odds of making a winning offer, a pre-approval also lets you know exactly how much mortgage you qualify for, so that you won’t waste time looking at properties you can’t afford.
2. House hunting without an agent
In this very tight market, the best way to find a house is to have a jump on the competition, says Bill Golden, a real estate agent with Re/Max Metro Atlanta Cityside in Atlanta.
“An agent will not only be the first to see when new listings come up, but they might even know about listings that haven’t even hit the market if they’re well-networked in the area where you’re looking,” Golden says. A buyer’s agent can also help you avoid costly negotiating mistakes when it comes time to make an offer.
3. Not knowing what you want
It’s important to make a wish list before you start shopping, because looking at extremely different types of properties will slow down the process, says Brendan O’Donnell with Center Coast Realty in Chicago.
“I had a client who was interested in one-of-a-kind loft spaces as well as typical cookie-cutter vintage condos, and because they were so different, he wasn’t able to sort out his priorities and make a decision,” O’Donnell recalls.
It’s fine to consider many types of properties at first to get a sense of your options, but try to narrow them down before you fill your weekends with home tours.
4. Waiting too long to see a home
In this tight market, if your real estate agent calls you about a new listing, do whatever you can to see it right away, Golden advises.
“Waiting even a day can make the difference between getting the house or not,” he warns.
5. Inviting outspoken (and uneducated) advisers
Is Mom going to live in the house? What about your best friend? Yeah, didn’t think so. So, even though it can be wise to get an unbiased second opinion, beware the desire to get too many opinions.
Often these folks are offering observations based on their own living situation, notes Joshua Jarvis of Jarvis Team Realty in Duluth, GA. In other words, they think a huge backyard is heaven, but you’re the one who has to mow it!
6. Speeding through an open house
To get a real sense of a house, you must explore it in detail, and an open house is the ideal time, says Rachel Ivers with the Blake Team at Keller Williams in Aurora, CO.
“That includes opening closets and pantry cabinets to ensure you have checked out every nook and cranny,” she says.
Even though you’ll eventually have an inspection, use the open house to note red flags: Look beyond the fancy sheers hanging on the windows to make sure the windows themselves are hanging straight; flip light switches to check their upkeep; and inspect the floors and foundation to make sure they’re up to par.
7. Becoming distracted by sparkly new features
Does the house look amazing at first glance? Sometimes you have to look a little closer, advises real estate agent RJ Winberg with South Pointe Properties in Rossmoor, CA. He frequently runs across investor flips that look perfect, but the devil is in the details—and sometimes the details leave a lot to be desired.
“A house flip can be a great buy because everything is new, but only if you choose a house where the renovation was done well,” Winberg says.
As you’re house hunting, look carefully for signs that indicate a rush job (e.g., gaps between new flooring and the walls; paint spatters on light switches, outlets, and windows). He also says to note the brands and materials used.
“The appliances, faucets, lights, and other fixtures often look great just because they are new, but sometimes they are lower-quality options that won’t stand the test of time,” Winberg says.
8. Expecting perfection
If you’re hoping to find the perfect-size house in the perfect neighborhood with the main-floor laundry room you want and the best schools, at a price you can afford, you can dream on, says Realtor® Aaron Hendon with Christine & Company with Keller Williams in Seattle.
“Two out of three isn’t bad,” he says, referring to your priority list. “It’s rare to get everything you want in any area of life, and home shopping is no different.”
Focus on what’s most important to you.
9. Falling in love with the decor—not the home
So, you’re dazzled as soon as you walk in the door. But is it the house that’s winning you over? Or the decor? It’s a home stager’s job to make you swoon, and unless you can tap the stager directly for tips, you’re probably not going to be able to replicate the look once you move in.
“Make sure you are envisioning yourself in the home and falling in love with the house itself, not the house the way it’s staged,” Ivers cautions.
10. Ignoring the neighborhood
When you tour a home, make sure you save some time to tour the neighborhood as well. Are the neighbor kids playing Metallica covers in the garage? Do cars speed down the street where your kids will play? The last thing you want is to be in a beautiful home in a nightmare neighborhood.
Once you’ve checked for any red flags, take some time to get the overall vibe of the community and make sure it’s right for you. Notice whether the neighborhood is quiet or bustling; whether it attracts families or singles; and whether neighbors congregate on their porches or keep to themselves. Also, check for local shops, restaurants, or parks if amenities are important to you, as well as access to freeways and public transportation.
https://www.realtor.com/advice/buy/house-hunting-mistakes/

Current Mortgage Rates

Mortgage rates for 30-year and 15-year fixed-rate home loans were unchanged, while the 5/1 ARM fell by one basis point, according to a NerdWallet survey of daily mortgage rates published by national lenders Friday morning.
Mortgage rates tend to follow the overall economic trends. On strong economic news, rates tend to rise. After weak economic news, they often fall. Today brought one of the most important economic indicators for mortgage rates: the monthly jobs report. It wasn’t strong. It wasn’t weak, either. The economy added 156,000 jobs in August, down from the average of 181,333 jobs added monthly over the previous three months. Meanwhile, the unemployment rate ticked up to 4.4% from 4.3%.
“A bit of a soft number, at 156,000 jobs added,” says Robert Frick, corporate economist for Navy Federal Credit Union. “But we need to remember that unemployment claims are low, which means the strong employment trend is continuing.” Frick says he doesn’t believe this employment report will have much effect on mortgage rates because it’s neither unexpectedly good nor bad.
Average weekly wages in August went down by $1.60 compared with July, to $907.82 from $909.42. Weekly wages have been trending upward since the end of the Great Recession, but they occasionally dip from one month to the next. It happened in May and in November 2016.
“The context here is clear: jobs strengthening, wages not, consumers still need a raise,” Frick says. He says continued slow wage growth will prompt the Federal Reserve to slow its pace of short-term interest-rate hikes next year.
MORTGAGE RATES TODAY, FRIDAY, SEPT. 1:
(Change from 8/31)
30-year fixed: 3.93% APR (NC)
15-year fixed: 3.35% APR (NC)
5/1 ARM: 3.85% APR (-0.01)

Loan Demand Buoyed by Slight Drop in Rates

Wednesday, February 08, 2017

A slight decrease in mortgage rates last week gave home buyers a slight jolt to get moving. Total mortgage application volume, which includes refinancings and home purchases, increased 2.3 percent on a seasonally adjusted basis last week, the Mortgage Bankers Association reported Wednesday. That said, applications continue to run 23 percent below year-ago levels, mostly due to a big drop in refinancing applications.
Last week, mortgage applications for refinancings rose 2 percent on a seasonally adjusted basis, but they are 40 percent lower than a year ago, the MBA reports. Many borrowers may have already taken advantage of low mortgage rates over the past year, so the refinancing pool continues to shrink.
Applications for home purchases, viewed as a gauge of homebuying activity, also rose 2 percent last week. Home purchase applications are now 3.6 percent higher than a year ago.
“Mortgage rates continued to show volatility from week to week, decreasing 4 basis points to 4.35 percent last week after two weeks of increases,” says Joel Kan, an MBA economist. “Since reaching a recent peak of almost 4.5 percent toward the end of December, rates have bounced around the 4.3 percent mark for the past six weeks

Consumers Will Compromise to Buy Homes

Real Estate News | Wednesday, February 08, 2017

Consumers view homeownership as a priority and say they’re willing to make significant compromises in order to purchase a home, according to a survey of more than 1,000 consumers considering a home purchase in 2017, conducted by the online brokerage firm Owners.com.
Sixty-nine percent of survey respondents say they’re concerned they won’t have enough cash for a down payment in order to buy a home. As such, they’re willing to forgo some financial goals and investments to make sure they save enough.
Respondents said that saving for a home takes priority over saving for an emergency (61 percent) or contributing to retirement funds (60 percent). Seventy-two percent of survey respondents said they would limit their contributions to other investment funds in order to save enough to buy a home.
Surveyed consumers also say they’re willing to compromise on some elements of the home if it means they can move into a home this year. For example, 51 percent said they would consider buying a fixer-upper, and 36 percent said they would purchase a smaller home than what they desire.

Why Very Low Interest Rates May Stick Around

The Federal Reserve will most likely raise interest rates this week for the first time in nearly a decade. To understand what it means — and doesn’t mean — consider a previous year in which interest rates were on the rise.

In 1920, borrowing costs soared to their highest levels since the end of the Civil War. Some people were terrified of what it was doing to the economy. Higher rates “would practically legalize usury,” a real estate trade group warned. A Democratic senator complained that “manufacturers, merchants and business men are entitled to stability.” The Federal Reserve was “confronted with conditions more or less abnormal,” acknowledged a governor of the central bank, William P.G. Harding.

The interest rate that caused this angst? A mere 5.4 percent on the 10-year United States Treasury bond — lower than the rates during the entirety of the 1980s and most of the 1990s.

What does this have to do with the Fed’s likely move this week? For years, financial commentators have been predicting an imminent rise in rates. After all, goes the theory, the Fed has been engaged in extraordinary interventions to artificially depress the cost of borrowing money. Surely those rates will snap back to their pre-2008 levels, if not rise higher. If that happens, get ready for double-digit mortgage rates and substantially higher cost to maintain the government debt.

But if you look at the longer arc of history, a much different possibility emerges. Investors have often talked about the global economy since the crisis as reflecting a “new normal” of slow growth and low inflation. But, just maybe, we’ve really returned to the Old Normal.

Very low rates have often persisted for decades upon decades, pretty much whenever inflation is quiescent, as it is now. The interest rate on a 10-year Treasury bond was below 4 percent every year from 1876 to 1919, then again from 1924 to 1958. The record is even clearer in Britain, where long-term rates were under 4 percent for nearly a century straight, from 1820 until the onset of World War I.

The real aberration looks like the 7.3 percent average experienced in the United States from 1970 to 2007.

“We’re returning to normal, and it’s just taken time for people to realize that,” said Byron Taylor, chief economist of Global Financial Data, which scours old records to calculate historical financial data, including that cited here. “I think interest rates are going to stay low for several decades.”

If so, it would mean that many predictions through the last several years of ultralow interest rates have misread the situation. “Once the economy gets going, then interest rates are going to take a big leap,” said George Soros, the billionaire hedge fund manager, in a 2013 CNBC interview.

“We can expect rapidly rising prices and much, much higher interest rates over the next four or five years,” wrote the economist Arthur B. Laffer in The Wall Street Journal in 2009. In 2014, all 67 economists surveyed by Bloomberg predicted higher rates six months hence; they instead fell sharply.

Of course, rates could go up. But what that analysis may have missed is that interest rates historically are most closely tied to inflation. How much investors demand as compensation for loaning their money is shaped in no small part by how much they think that money will be worth when they get it back. And the pressures that normally generate inflation seem to have disappeared in recent years.

The Fed and its counterparts overseas at the European Central Bank and Bank of Japan have spent the last few years applying every policy they can think of to get inflation to rise up to their 2 percent target, with limited success. In a world awash in supply of workers, oil and more, financial markets show little sign that investors think that will change anytime soon. Current Treasury bond prices predict annual inflation in the United States of only 1.7 percent a year over the next three decades.

Consumer confidence and home sales surge, hinting at a big 2015 for housing

By Schuyler Velasco

New home sales surged 11.6 percent last month to a 481,000 annualized pace, according to data released Tuesday by the Commerce Department. That was well above economists’ expectations of a 450,000 December pace and a bounce back from November, which was revised downward to a 431,000 pace.

It was the best December for the new home market in nearly six years.

Home prices, too, are going up across the US, albeit more slowly than they were a year ago. In a report also released Tuesday, prices on S&P/Case Shiller’s national index inched up 0.8 percent in November and 4.7 percent year-over-year. But slower price increases, analysts say, should not be interpreted as a sign of lessening demand. 

“This number paints a misleading picture of the housing market,” IHS Global Insight economists Patrick Newport and Stephanie Karol write in an e-mailed analysis. “All in all, evidence suggests that demand is strong nationwide: both the S&P/Case-Shiller national index and the FHFA measure [another leading index] showed yearly home price growth accelerating in November. By these more comprehensive measures, price growth is stabilizing in the 4-5 percent range: a healthy sign.”

Recent sales numbers, too, seem to bear out that logic. New home sales make up a relatively small portion of the overall market, but the much-larger pre-owned market also perked up in December, rising 2.4 percent on the month.

Both gains capped off a relatively lackluster 2014 (new home sales improved just 1.2 percent over 2013), and gave economists more evidence that 2015 could be a big improvement for the housing market. Both builders and consumers are growing more and more confident about the economy overall; in data also released Tuesday, The Conference Board’s index of US consumer confidence surged to 102.9 in January, blowing past expectations of a 95.5 reading. Monthly gas prices at or below $2.00 per gallon in most of the country, a strong dollar, a healthy job market, a pickup in wages (finally), and new rules easing up on FHA mortgage insurance premiums that could benefit first-time buyers all portend a much more buyer-friendly market in the coming year.

Earlier this month, measures of builder optimism and housing starts also came in strong, suggesting that the construction industry is readying for a pickup in housing demand in the coming months.

Economists caution that one strong month is hardly a trend, especially in the case of a small, sometimes-volatile measure like new home sales. But December’s data is reason for cautious optimism.

“As more first-time buyers are empowered to purchase an existing home, the sellers of those homes will be in a better position to put down a deposit on a new one,” Newport and Karol write. “Since we expect wage growth to support additional household formation in 2015, these forces will help to clear some important obstacles which have restrained demand in recent years.”

Fannie Mae’s New 97% LTV Mortgage Loan Requires Just 3% Down

3% Down: A New Mortgage Program For 2015

There’s a new low-downpayment mortgage option available to today’s home buyers; and a lower-equity refinance available to refinancing households.

The program, which is available via Fannie Mae today, is not formally named. It’s an extension of the existing MyCommunityMortgage (MCM) program; and, in official Fannie Mae documents, is referred to as the “expanded LTV” program.

The 97% loan-to-value program is meant to help home buyers who might other qualify for a loan but lack the resources to make a five percent downpayment or more.

It’s also geared at homeowners whose homes have lost value since purchase but who are otherwise ineligible for the Home Affordable Refinance Program (HARP) because their loan start date is after May 31, 2009; or for some other reason.

The 97% LTV program is available beginning December 13, 2014. The program has no set end date.

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The 97% LTV Mortgage And Other Low-Downpayment And No-Downpayment Mortgage Options

Mortgage lenders are making it easier get approved for a mortgage.

Fannie Mae and Freddie Mac have announced a new low-downpayment mortgage program which requires just 3% down at closing, joining other government agencies in offering loans which require little or no money down.

The 97% mortgage program marks Fannie Mae and Freddie Mac’s second foray into low-downpayment lending. It’s previous program — the Conventional 97 — was discontinued in late-2013 despite popularity among first-time and repeat buyers.

The new, retooled 97% LTV program is more forgiving toward first-time buyers than was the Conventional 97; and the new program can be used for home refinances, as well, with few restrictions.

In offering a 3 percent down-payment program, Fannie Mae and Freddie Mac bring yet another financing option to today’s home buyers wanting to minimize their downpayment.

Among the most popular low-downpayment options in today’s market is the FHA loan.

FHA loans require downpayments of 3.5% and provide for flexible underwriting standards. Home buyers with less-than-perfect credit may find FHA loans to be more cost-effective than loans via Fannie Mae or Freddie Mac; and simpler for which to get approved, too.

FHA mortgage rates are typically 25 basis points (0.25%) below rates for a comparable conventional loan.

VA loans are another popular option. Available to veterans and active members of the military, VA loans allow for 100% financing and never require mortgage insurance to be paid.

VA mortgage rates are typically 37.5 basis points (0.375%) below rates for a comparable conventional loan. VA loans are backed by the Department of Veterans Affairs.

Lastly, there’s the USDA loan.

USDA loans are guaranteed by the U.S. Department of Agriculture and, although they’re sometimes called “Rural Housing Loans”, USDA loans can be used in many suburban locations, too.

USDA loans offer very low rates and allow for 100% financing. They also require just a small mortgage insurance premium as compared to other low- and no-downpayment loans.

Today’s home buyer has plenty of financing options.

Click to get today’s live rates.

3% Down Mortgage Eligibility Q&A

Is the 97% LTV loan the same program as the now-retired Conventional 97?

No, the 97% LTV is different from the Conventional 97 program, which was retired in 2013. The newer version of the 97% loan is more forgiving toward home buyers and allows homeowners to refinance to today’s mortgage rates.

Can first-time buyers use the 97% LTV program to purchase a home?

Yes. The 97 percent program can be used by first-time 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. If you previously owned a home, but have not owned a home since three years ago, you are considered to be a “first-time home buyer”.

Is the 97% program the same as the MyCommunityMortgage® program?

No, MyCommunityMortgage® is a different program. That program is aimed at certain members of the community including teachers and firefighters; and which may offer more flexible underwriting standards than a traditional mortgage program.

Are downpayments larger than 3% allowed with the 97% LTV program?

Yes, there is no limit to the size of your downpayment with the 97% LTV program. With a downpayment of five percent or more, though, you will no longer be using the 97% program.

Is the low-downpayment mortgage program via Fannie Mae and Freddie Mac better than a FHA loan?

There is no “best” low-downpayment mortgage program. What’s best for one home buyer may not be what’s best for another. Each program has its benefits.

What mortgage products are available via the 97% mortgage program?

The 97% mortgage program allows mortgage applicants to use the 30-year fixed rate mortgage only. 15-year and 20-year fixed rate mortgages are not available; nor are fixed-rate loans of other terms and ARMs.

Can I use an adjustable-rate mortgage (ARM) with the 97% program?

No, the 97% program allows mortgage applicants to use 30-year fixed rate mortgages only.

What is the loan limit on the 3% down program through Fannie Mae and Freddie Mac?

The 3% downpayment 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 3% downpayment program?

The 3 percent down-payment 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 cannot be financed via the program.

Are vacation homes eligible under the 3% downpayment program?

No, the 3% downpayment program is for primary residences only. Vacation and second homes are not allowed.

Can the 3% downpayment program be used for investment properties?

No, the 3 percent down-payment program is for primary homes only. Investment properties are not allowed.

Does the 97% LTV mortgage program require home buyers to attend home-buyer counseling?

No, there is no home-buyer counseling requirement with the 97% LTV mortgage program.

Is private mortgage insurance required with the 97% mortgage program?

Yes, mortgage applicants are required to pay private mortgage insurance (PMI) as part of the 97% mortgage program. Your mortgage lender will arrange for your mortgage insurance policy at the time of application.

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% program to be Fannie Mae-backed.

How do I determine whether my loan is a Fannie Mae-backed loan?

To determine whether your loan is backed by Fannie Mae, you can ask your lender or use Fannie Mae’s loan lookup tool.

Are cash-out refinances allowed with the 97% mortgage program?

No, the 97% mortgage program does not allow cash-out refinances. Borrowers may do a cash-in refinance or a “limited cash-out” refinance only.

Get Today’s Mortgage Rates Now

The new 97% mortgage program from Fannie Mae and Freddie Mac is another low-downpayment option for today’s home buyer; and a simplified way for existing homeowners to get a refinance.

Get started with today’s mortgage rates now. Quotes are available online with no cost and no obligation to proceed. Your social security number is not required to get started.