Cut Freddie Mac’s mortgage by 3%
Homebuyers today face many obstacles. You may be worried about buying a low-income home or saving for a down payment. Maybe your credit score is not perfect.
If you are dealing with any of these barriers, a Freddie Mac Home Possible loan may be the perfect solution.
The home mortgage program requires a minimum of 3% and has more flexible lending requirements than some other types of loans. So it can be ideal for many first time buyers who need an extra boost.
Check your home purchase eligibility (December 25, 2021)
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What is a possible home loan program?
Some mortgage loan programs require you to put anywhere from 10-20% on a home, have a preferred credit score, and meet strict income requirements.
These are among the reasons why many first-time homebuyers—and even homeowners looking to refinance—don’t think they can qualify for mortgage financing.
Fortunately, there are a few different programs aimed at helping these borrowers. Whether you need a small down payment, more flexible credit requirements, or income flexibility, there are options to help.
One such program is called Home Possible, and it is supported by the government-sponsored Freddie Mac Foundation.
About Freddie Mac’s house mortgage as possible
The Possible Home Mortgage is aimed at low-income borrowers who may not qualify for mortgage financing.
This program makes home ownership easier because it lowers entry barriers: that is, you only need a 3% down payment and 660 credit score with a home purchase loan.
“Freddie Mac Home Possible offers more options to suit a variety of borrower situations,” explains Jared Maxwell, Vice President of Direct Consumer Lending for Embrace Home Loans.
“This program aims to help people with incomes of 80% or less of the median income in the region by providing low payment options and flexible sources of down payment money,” Maxwell says.
With Home Possible, you don’t have to cover your down payment at 3% out of your pocket.
The money can come from a down payment assistance program or even a gift from a family member.
Note that although Freddie Mac supports this loan program, Freddie is not a lender.
Potential loans are created through private lenders, so borrowers have the ability to shop for a mortgage lender and compare interest rates.
Check your home purchase eligibility with top lenders (December 25, 2021)
Who Is Eligible For A Possible Home Loan?
To qualify for a home mortgage loan, you must meet the eligibility requirements set by Freddie Mac and your lender. In short, you will need:
- A credit score of 660 or higher
- 3% down payment
- DTI less than 43%
- stable income and stable employment
- Household income is no more than 80% of your area average
- You will live in the house as the main dwelling
“Home Possible is available to anyone who makes less than 80% of the average monthly income for the zip code they will buy in,” says Ralph Debognara, founder of Home Qualified.
“In addition, the property must be owned by at least one owner of the loan applicants, and a minimum FICO credit score of 660 for all loan applicants. The program is also only available for single-family residences,” explains Debognara. .
Other requirements for potential home loans include:
- A debt-to-income (DTI) ratio of 43% or less if the loan is approved through Freddie Mac’s automated typing system. Or, DTI of 45% or less if the loan is guaranteed manually
- A loan-to-value (LTV) ratio of 97% or less (meaning you’ve cut at least 3%). If you have multiple home loans or a second mortgage – used to cover the down payment, perhaps – the maximum permanent value is 105%
While first-time homebuyers can access this program, individuals who have owned a home in the past or who have an interest in an additional funded residential property can qualify as long as their income is 80% of the area’s median income and at least one borrower resides in the home as their residence Basic,” Maxwell notes.
He explains, “The loan officer will run the application through Freddie Mac’s automated underwriting system to ensure that the loan meets qualification requirements, or will submit the application as a manual guarantor if the lender allows it.”
Another advantage? You can also qualify with one of the co-signers of the loan.
“Non-resident joint clients are allowed in this program, which means you can qualify with the income of a parent or other individual who agrees to co-sign the loan with you,” says Imani Francis, mortgage expert at Loans.org. .
Note that at least one borrower must participate in the home ownership education program if all occupying borrowers are to be first-time buyers, or if the credit history of all borrowers is determined using non-traditional payment records.
Check Your Potential Hoem Eligibility (December 25, 2021)
Home Possible Income Limits
Since mid-2019, Freddie Mac has required that the borrower’s eligible income, converted on an annual basis, not exceed 80% of the area average income (AMI) of the mortgaged home location.
Despite the program’s minimal down payment requirements, potential home mortgages contain risk control measures that encourage prudent financing. This is why your annual income cannot exceed this limit,” Francis notes.
To better determine if you qualify, use the Home Income and Property Eligibility Tool.
Home Possible Interest Rates and Mortgage Insurance
The potential home mortgage interest rates are competitive with other traditional low down payment loans. This means that borrowers can access today’s lower mortgage rates through the Home Possible Program.
Of course, the interest rate you qualify for will depend on many factors, including the lender, loan term, and credit score.
Be aware that you will also be required to pay Private Mortgage Insurance (PMI) on a home purchase loan. This will increase your monthly mortgage payments.
The good news is that mortgage insurance on one-unit properties can be canceled after your loan balance drops below 80% of the home’s appraised value and the cancellation criteria are met. Also, mortgage insurance coverage requirements have been lowered for LTV rates over 90% (which means you’ve lowered 10% or more).
Alternatives to a Possible Freddie Mac Home Loan
Of course, a Home Possible loan is not your only option for a low down payment. You may also qualify for other home loan programs, including:
- FHA Loan Requirements: 3.5% lower, 580 minimum credit score, 43% maximum DTI
- Conventional loan 97 – (Provided by Fannie Mae / Freddy Mac). Requirements: 3% increase, minimum 620-660 credit score, max 50% DTI, max 97% LTV
- Ready-to-deliver loan from Fannie Mae Requirements: 3% increment, minimum 620-680 credit score, max 50% DTI, max 97% DVA, annual income cannot exceed 100% of median income for that area
- home loan VA Requirements: 0% lower, 580-660 minimum FICO credit score, 41% max DTI, Must be a seasoned veteran, active duty member or spouse of a veteran
- USDA loan Requirements: 640 minimum credit score FICO, max 41% DTI, annual income cannot exceed 115% of median income in the region, purchase must be made in rural eligible areas.
“An FHA loan is likely your next best option if you don’t qualify for or seek a potential home purchase loan,” Francis says.
Previous with a guarantee [Federal Housing Administration] It’s available to low-to-middle-income borrowers, and has a lower minimum down payment and lower credit score requirements than many traditional loans.”
A HomeReady loan is another good option backed by Fannie Mae.
In many ways, HomeReady is similar to Home Possible. But as an added bonus, you can use income from non-borrowing family members to help you qualify. For example, if you have a parent or roommate with you — but you’re not applying for a mortgage — their income can still help you qualify for the loan.
Freddie Mac Home FAQ
Home Possible is a loan program offered by Freddie Mac designed to help low-income borrowers own or refinance homes. With a loan to buy a home, you need less than 3 percent, although your income cannot exceed 80 percent of the median income for the area in the zip code where you want to buy a home.
According to Freddie Mac’s requirements, you will need a FICO score of 660 or higher to qualify for a Home Possible Loan.
Eligible debt-to-income ratios are usually determined by Freddie Mac’s automated underwriting tool. However, this percentage can be as high as 45 percent for hand-written mortgages.
The maximum loan-to-value (LTV) ratio for a home purchase loan is 97 percent. Or, with Freddie Mac’s reasonable seconds — a second mortgage that can help cover down payment and closing costs — a total LTV of 105 percent is allowed.
No, you do not have to be a first-time buyer to qualify for a home purchase loan. Frequent buyers and homeowners looking to refinance may also be eligible.
You can use the potential home loan to do a rate and term refinance process without withdrawing cash. This may be an option if you have very little equity in the house. You can also refinance from a Home Possible loan to a different loan program, provided you qualify.
No, you cannot withdraw cash from a possible home refinance loan. Only refinancing is allowed based on price and term.
Freddie Mac also offers a different loan program called HomeOne. Like Home Possible, it only offers 3 percent loans. But unlike Home Possible, at least one borrower must be a first-time home buyer when a HomeOne mortgage is a purchase loan.
Fannie Mae offers a loan program called HomeReady that is similar to Home Possible. Both allow you to borrow up to 97 percent of the property’s value with a first mortgage. But every loan comes with different rules and benefits. For example, HomeReady has a minimum credit score requirement of 620 versus the Home Possible minimum credit score requirement of 660, according to Jared Maxwell of Embrace Home Loan.
There are a variety of 3 percent mortgage programs available through Fannie Mae and Freddie Mac. Requirements vary, but expect to need a credit score of at least 620-660 and a debt-to-income ratio of less than 45 percent. You will usually need to occupy the house as your primary residence. You may also need to be within the local income limits.
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