Commonwealth Mortgage Assurance Co., the Kentucky Housing Corp., and Fannie Mae have launched a homeownership program in Kentucky.

The conventional loan program is intended for the state's low- and moderate-income homebuyers. The loans require as little as a 3% down payment.

Commonwealth, based here, will offer mortgage insurance coverage. Kentucky Housing will place the loans in Fannie Mae mortgage-backed securities.

This program, which uses Fannie Mae's Community Home Buyers Program mortgage, is unusual in that funds for the closing costs and prepaid portion of the purchase can come from a gift, grant, or other approved sources, including a loan from Kentucky Housing's closing costs and assistance program.

"This program enables us to reach another segment of potential homebuyers who typically shy away from government-insured loans," said F. Lynn Luallen, Kentucky Housing's chief executive officer. "It will also be appealing to many lenders in currently hard-to-serve areas because there are fewer constraints than with FHA or VA loans."

In accordance with Fannie Mae and Commonwealth Mortgage requirements, participants in the program will be required to get homeownership education or counseling before the loan is underwritten.

This service will be offered through Commonwealth's homeownership counseling center, Kentucky Housing's "Yes You Can ... Own a Home" program, or a counseling agency approved by Commonwealth.

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