Low and moderate-income families now have a better chance of obtaining mortgage financing for a home they want to buy with the Freddie Mac Home Possible Program. This program has flexible credit guidelines and other underwriting requirements to make it easy to obtain the homeownership you’ve dreamt of achieving. This program is strictly for owner-occupied properties.
The Freddie Mac Home Possible Program offers unique and flexible guidelines to make it easy to buy the home you want. Keep reading to learn if you might qualify for this loan program.
What’s the Purpose of the Freddie Mac Home Possible Program?
The main premise of the Freddie Mac Home Possible Program is the low down payment requirements. Oftentimes, down payment requirements stand in the way of a potential homebuyer and the home they want. If you have low to moderate income and are a first-time homebuyer, you may qualify for this flexible program.
Borrowers only need to come up with either 3% or 5% of the home’s purchase price for a down payment, depending on the chosen program. The program also offers lower mortgage insurance rates and easier underwriting guidelines to make it easier for you to purchase and/or refinance a home. The source of the down payment can come from any credit second mortgage program; it doesn’t have to be your own funds.
Qualifying for the Freddie Mac Home Possible Program
Qualifying for the Freddie Mac Home Possible Program is easier than many other loan programs out there today. You need a minimum credit score of 660 and you must not exceed the debt ratio requirement of 43% (some can go as high as 45%.)
Your income must not be greater than the average for the area, unless you live in an underserved area. If this is the case, there isn’t a maximum amount of income that you can make. You can check your income status here. One nice thing about the Freddie Mac program is that you can use rental income for qualifying purposes. The only caveat is that you must have proof of receipt of the income for at least the last nine months in order to qualify. If you don’t, you may not be able to use the income; however, you may be able to use a non-occupying co-borrower. If you have a relative that is willing to go on the loan with you, but that will not live with you, they may be a co-borrower, helping you qualify for the loan.
Finally, you must be a first-time homebuyer (unless you are refinancing). Luckily, you are a first-time homebuyer has long as you haven’t owned a home within the last three years. Borrowers that lost their home to foreclosure or gave it up in a short sale are good candidates.
In order to finalize your loan, you must undergo an approved education course for homebuyers. You can take the course in person or online. It will help you understand the full depth of homeownership to make sure that you are cut out for it.
The Benefits of the Home Possible Programs
The most important benefit of these programs is the lack of down payment required. You don’t have to contribute any of your own funds, which makes it easier to become a homeowner. The only case where you would have to put your own money down on the home is if you buy a 2-4 unit property. In this case, you would need at least a 3% down payment; all other single-family properties don’t require a downpayment from your own funds, though. You can use the program on single-family properties, condos, PUDs, and 2-4 unit properties. In addition, you can use the Home Possible loan on manufactured homes, but not the Home Possible Advantage program.
Other benefits of the Home Possible Program include:
- You can secure a 30-year fixed rate loan or various ARMs with the standard Freddie Mac Home Possible loans
- You won’t need reserves unless you purchase a 2-4 unit property, which would require 2 months of reserves
- You’ll enjoy lower mortgage insurance premiums
- You can eliminate the mortgage insurance once you owe less than 80% of the home’s value
- You can use any secondary source for a down payment loan as long as it’s Freddie Mac approved
- You can get the loan without a credit score as long as you have three trade lines in good standing
The Freddie Mac Home Possible program helps low to moderate income families get the home they always wanted. If you are credit-worthy, but just don’t have the necessary down payment for the loan, Freddie Mac can help you get the loan you need to buy a home.