The Real Deal Miami

New rules yield lower interest rates for smaller down payments

September 08, 2009 08:41AM

New regulations from Fannie Mae and Freddie Mac are bucking conventional wisdom surrounding down payments and mortgage rates. According to rules put in place in late 2008, borrowers who put a 20 to 25 percent down payment on a home are classified as the riskiest class of borrower because they’re not required to take out private mortgage insurance. The result is that borrowers who make smaller down payments often have lower interest rates, according to this report. Fannie Mae spokesperson Amy Bonitatibus said that the new classification system was meant to highlight the importance of mortgage insurance, not dissuade borrowers from making larger down payments. “It’s just a less risky loan from our point of view,” Bonitatibus said.