The general rule used to be that if a homebuyer did not put at least a 20% down payment on a house they would face the risk of expensive private mortgage insurance and higher interest rates.

Rules put in place by Fannie Mae and also adopted by Freddie Mac at the end of 2008 made it so that people putting down between a 20 - 25% downpayment were considered “riskier” mortgages to lend out than those who are in the 20% or lower range or than those above the 25% range.

People who put down below 20% on a house are usually required to pay for private mortgage insurance but received the same interest rate as those who put down 20%.  Whereas those who put down over 20% but less than 25% were considered a higher risk and were offered higher interest rates even as high as a whole percent higher than those in a different down payment class.

Fannie Mae and Freddie Mac representatives said that the reason they count them as a riskier investment is because they are they are at the lower end of downpayments that do not require private mortgage insurance.

If you are interested in purchasing a home in Staten Island or Brooklyn, New York or New Jersey contact Steven T. Decker, an experienced New York real estate attorney, at 718.979.4300 to discuss how we can represent you in the purchase of your home.