According to Fannie Mae, residential loan production is predicted to fall by nearly 40 percent in 2014 compared to last year. That’s a significant drop and if production does fall to those levels mortgage loan production for the year will be fewer than 2008 when the mortgage debacle began to tighten itsGood News for Investors grip on the economy. That said, the Federal Housing Finance Agency and mortgage lenders in general are trying to come up with programs that will help spur home buying hence mortgage production.

 One of the proposals introduced by Fannie Mae is a 3.00 percent down payment mortgage. Currently, both Fannie Mae and Freddie Mac offer loan programs with only 5.00 percent down. The 3.00 percent minimum is 0.50 percent lower than what FHA loans require.

Lenders will still require a private mortgage insurance policy for the 3.00 percent down programs and mortgage insurance providers have yet to issue premium amounts and approval guidelines for these new loans. The new loans will provide borrowers with more choices and less down payment, albeit slightly so, than what is currently being offered. There are zero down options from the veterans’ administration and USDA has no down payment offerings for specific rural and semi-rural areas.

Will this new program help first timers get into the housing market? It’s difficult to say as it appears the new Fannie program varies little from the FHA program with regard to down payment and closing costs. The only major difference will be the ability to ultimately remove mortgage insurance from the new Fannie program as FHA loans originated after April 1, 2013 will always require mortgage insurance, regardless of the equity position a borrower may have in the future.

Mortgage insurance premiums for the 3.00 percent down loan will be higher than those with 5.00 percent down and higher still for first time buyers. Still, any new program that attracts first timers should appeal to real estate investors who want to widen their potential pool of buyers. This new program will do just that.