Months ago, Fannie Mae decided that buyers should come up with higher down payment (DP) in what they call 'declining markets.' (Read about it here). Maybe it's such a bad decision because it helps put on the brakes home buying especially for first-time buyers.
According to AP, Fannie decided to scrap the plan. So now only 3%-5% down is needed regardless of local market conditions (declining or not) which our area, DC metro region, is one of the 'declining markets.' We're now back to 97% or 95% loan-to-value ratio.
Via Fannie Mae.
"... Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® (DU®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States. The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining.
"As another part of our 'Keys to RecoveryTM' initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions," Marianne Sullivan, Senior Vice President, Single-Family Credit Policy and Risk Management, said. "This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover."
The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy. [emphasis added]
That's just the down payment part. Other restrictions still apply.
UPDATE: This announcement was so 'new' (announced this am) that even the loan guy in my office was not aware of this :-)
FURTHER UPDATE: Not clear if condo included in the new policy? It doesn't say about it anywhere in the context, it refers only to "..single family, primary residences." Does primary residence extends to condo? We have yet to see how this going to play out soon.