Freddie Mac launched the Home Possible mortgage program in 2014 to make it easier for borrowers with extremely low to moderate incomes to purchase a home. Applicants without credit scores are eligible borrowers, and down payments as low as 3% are permitted.
- HomeReady is a Fannie Mae program that is broadly comparable.
- Freddie Mac offers the Home Possible program to borrowers with low and middle incomes.
- Low fees, low down payments, and low mortgage insurance requirements are all available.
- The way that borrowers fund their down payments is flexible.
In low-income census tracts, there are no income restrictions. In other census tracts, eligible borrowers won’t make more than 100% of the median income for that area (AMI).
- However, in some cases, the income cap could be set at 80% of AMI.
- If the loan-to-value (LTV) ratio on the property does not exceed 95%, borrowers without credit scores may be eligible for a Home Possible mortgage.
- The program is open to all potential homebuyers.
- If more than one borrower applies for the loan, at least one of them must live there as their primary residence.
Home Possible mortgages are available for a wide range of home types. These consist of buildings with 1-4 dwelling units, apartments, planned communities, and specific manufactured homes.
advantages for borrowers
Borrowers can meet their required 3 percent down payment from a number of sources other than their own personal funds. Among them are Affordable Seconds, employer-assisted homeownership (EAH) programs, gifts from family members, money from a government or non-government organization, and funds.
- In some cases, sweat equity may also be used to meet the down payment.
- Freddie Mac created the Affordable Seconds program to help homebuyers with closing costs and down payments.
- Mortgage insurance can be canceled if the LTV ratio is less than 80%, and the amount of coverage needed increases as the LTV ratio rises above 90%. Credit fees are capped and lower than standard fees for loans with an LTV ratio over 80%.
- The assessment of a “adverse market” fee on refinancing transactions, which is intended to recoup up for estimated losses of $6 billion in 2020 and 2021, has been delayed by Freddie Mac in the meantime.
Advantages For Lenders
In order to increase their market opportunity and give lenders access to “borrowers in a wide range of life stages, from millennials purchasing their first home to move-up borrowers and retirees considering downsizing,” Freddie Mac promotes Home Possible to lenders. Freddie Mac is also able to sell mortgages from lenders that are part of the Home Possible program.