WASHINGTON—Fannie Mae has expanded offerings for low downpayment loans for first-time homebuyers, and is accepting applications immediately for borrowers with FICO credit scores as low as 620.
In addition, Fannie Mae is offering limited cash-out refinances.
The move follows efforts by the federal government to have lenders loosen credit score requirements and open the market to more borrowers. Fannie Mae’s program would allow borrowers to qualify with as little as a 3% downpayment.
Fannie Mae said it does not see any significant potential risk in its new looser standards.
Meanwhile, Fannie's cash-out refinancing option is available only to borrowers who already have a mortgage with the company, and requires that borrowers not take any equity out of the home. It does, however, allow the borrower to cover up to $2,000 in closing costs and take advantage of lower interest rates.
To date, Freddie Mac has been more conservative in its approach and will not launch its low downpayment program until March of 2015.
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