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3-Jan-19 – With the stock market on a roller coaster and affordable mortgage interest rates of 4.5 percent still available, now is the time for first-time home buyers to learn about an age-old axiom of real estate investing. “Buy on the fringe and wait,” advised Chicago real estate mogul Arthur Rubloff back in the 1960s. Now, thanks to Fannie Mae’s Home Ready and Freddie Mac’s Home Possible programs, first-time buyers can follow Rubloff’s wise advice and purchase a home or small apartment building with a conventional mortgage and place a down payment of only three to five percent with loan-to-value ratios of 97 and 95 percent, respectively.
For Millennials paying off student loan debt, Home Possible may be the Holy Grail of loan programs that could help them vault across the threshold of homeownership. Under the Fannie Mae and Freddie Mac programs, down payment money can come from a variety of sources, including family, employer-assistance programs, secondary financing, and sweat equity. 
Because the loan amount is greater than 80 percent of the purchase price or appraised value, whichever is lower, private mortgage insurance is required until the borrower’s equity reaches 20 percent. A wide range of mortgage types is available under the programs, from 15-year and 30-year fixed-rate loans to an assortment of adjustable-rate programs, including 5/1, 5/5, 7/1, and 10/1 ARMs. On January 3, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed mortgages nationwide averaged 4.51 percent, down from 4.55 percent a week earlier. A year ago, the 30-year fixed loans averaged 3.95 percent. The average rate on 5/1 Treasury-indexed hybrid adjustable-rate mortgages averaged 3.98 percent on January 3, down from 4 percent a week earlier. Last year at this time the rate was 3.45 percent. “Do-it-yourselfers can apply sweat equity to assist in meeting their down payment and closing costs, and co-borrowers who do not live in the home can be included for a borrower’s one-unit residence,” Freddie Mac advised. Investor borrowers are permitted to own other properties and benefit from the competitive pricing and ease of a conventional mortgage. Under the guidelines of the Home Possible program, borrowers who target a property in a designated United States Census tract can purchase a home or condominium with a down payment of only 3 percent – or a two-flat, three-flat, or four-flat apartment building with a down payment as little as 5 percent – and qualify for a 30-year fixed-rate mortgage with no income limits. More than a dozen Chicago neighborhoods qualify The Home Front visited the Freddie Mac/Home Possible website and found a map highlighting more than a dozen attractive North Side and Northwest Side Chicago neighborhoods that fit the program. Most of these areas are north of North Avenue and west of Western.
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