Gifts Can Now Be Used for All of Required Down Payment on Conventional Loans!

At the beginning of this year, Fannie Mae and Freddie Mac announced that moving forward, all funds on a Conventional loan can come from a gift even if the borrower puts less than 20% down!  This was an amazing announcement considering in the past on a Conventional loan the borrower has always had to come up with at least 5% down from their own savings unless the borrower put 20% or more down.  Although Fannie and Freddie have been willing to implement this policy, it has not been something anyone could actually utilize because the PMI companies have not gone along with it, that is until now.

In early March (2011), one of the leading PMI companies, MGIC, announced that effective Feb 21, gifts and grants can be considered as the borrower’s own funds for purposes of meeting the 5% Minimum Borrower Contribution as long as the borrower’s credit score is 740 or higher, the debt ratio is 41% or lower, and the property is located in a Nonrestricted Market.  This is super news except for the fact that Atlanta is still defined as a Restricted Market right now by MGIC due to continued declining values.  With this said, it is only a matter of time until Atlanta moves off of MGIC’s Nonrestricted Market list and only a matter of time until other PMI companies begin matching this policy.  Thus, this should be something we can actually utilize in Georgia in the very near future!   

Please note that gifts or grants are acceptable from a relative defined as related by blood, marriage, adoption or legal guardianship, domestic partner or fiancé/fiancée, OR a public or non-profit organization, church, or municipality, OR an employer with an established employee assistance program.

March 18, 2011 by · Leave a Comment

About James

James A. Williamson is currently the Sr VP of Sales Development for Shelter Lending Services (formerly Fairfield Mortgage). James joined Shelter in 1994 and was the company's top Loan Officer in GA for 20 straight years helping over 2500 families finance their homes. James now oversees an incredible group of Loan Officers in Atlanta while further building Shelter's Atlanta business.

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