HOME POSSIBLE MORTGAGES

Promoting affordable housing is a big part of Freddie Mac’s mission. That said, this product is targeted at helping a specific market segment who could use assistance in home affordability. We’ll touch on what you need to know to qualify.

While this program is funded explicitly by Freddie Mac, Fannie Mae’s HomeReady® program is very similar in terms of both qualifications and who it targets. Your lender can help you decide which is right for you.

Low-Wage Earners

To qualify for this particular loan option, all clients’ income can’t be more than 80% of the area median income. This is targeted toward helping those with low incomes who can afford payments to qualify for home affordability based on a low down payment and, in many cases, more modest fees.

To see if you qualify in your area, check out Freddie Mac’s income lookup tool.

First-Time Home Buyers

Although you don’t have to be a first-time home buyer to take advantage of this program, it can certainly be an excellent option for first-time buyers. Because this will come up later, we’ll take a moment to say that both Fannie Mae and Freddie Mac consider a first-time home buyer to be anyone who hasn’t owned a residential property in the 3 years before purchase.

Freddie Mac Home Possible® Pros

There are several advantages to a Home PossibleⓇ mortgage. Let’s run through them.

• Low Down Payment: The first significant benefit of this loan option is that it only requires a 3% down payment. This is lower than the minimum 3.5% down payment required for FHA loans.
• Low LTV: LTV, or loan-to-value ratio, compares how much you owe on your loan to the value of your house and expresses this as a percentage. In most cases, you’re required to have an LTV somewhere between 80 – 95% depending on the mortgage you’re getting. With Home PossibleⓇ, you can finance up to 105% of your home value in total. This is because your down payment can be funded through a second mortgage in the Affordable Seconds program.
• Flexible Down Payment Sources: In addition to the second mortgage to fund a down payment, which is unique to this program, you can also receive your down payment from gift funds (including family members). With a 1-unit primary residence, your entire down payment may come from a gift. This provides additional options for those who need it.
• Lower Fees And Credit Scores: All major mortgage investors, such as Fannie Mae, Freddie Mac, the FHA, and the VA, have specific fees that are charged based on loan amounts and different risk factors. With Home PossibleⓇ , the lowest median FICO® Score to qualify is 580. However, if your median credit score is 680 or better, there are no additional pricing adjustments on loan. If the Score is below 680, there’s a maximum price adjustment of 1.5% of the loan amount.

Freddie Mac Home Possible® Cons

There are some disadvantages to the Home PossibleⓇ program. Let’s quickly run through what you need to know.

• Small Lending Network: Although many mortgage lenders offer Freddie Mac loans, including Rocket Mortgage, this isn’t universal. You may have to shop around a bit.
• Small Borrower Pool: Because the income limits associated with this loan option make the potential pool of borrowers smaller than the general market, some lenders may choose not to offer this program because of the hassle.
• Primary Residence Only: This option is only available for primary residences. These are homes you live in the majority of the year. It’s not available for vacation homes or investment properties. The good news is that you can purchase up to 4 units, so you can live in one and rent out the others.

Freddie Mac Home Possible® Income Limits

Since these loan options are intended for low-income borrowers, there are income limits that will need to be met by the applicant. As we mentioned earlier, to qualify for Freddie Mac Home PossibleⓇ loans, the income of all clients on loan can’t be more than 80% of the area median income. Freddie Mac has an income lookup tool to help potential borrowers determine if they qualify.