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Freddie Mac Home Possible Mortgage Overview

Freddie Mac Home Possible Mortgage Overview

  • Key Freddie Mac Home Possible Mortgage Program Considerations
  • Pros Cons
    • Ability to purchase a home with low down payment and no borrower contribution
    • Ability to include rental income from boarders and other units in multi-unit property to qualify for a mortgage
    • Potentially reduced interest rate for borrowers with low incomes or for properties located in designated areas
    • No up-front FHA mortgage insurance premium (MIP) and potentially lower ongoing private mortgage insurance (PMI) cost as compared to the ongoing FHA MIP cost
    • The borrower is not required to maintain reserves if buying a single-family property
    • Typically higher interest rate than other government-backed low / no down payment mortgage programs, depending on borrower income and where the property is located
    • Requires borrower to pay ongoing Private Mortgage Insurance (PMI)
    • The borrower is subject to maximum income limits
    • Limits on mortgage amount
  • Home Possible Mortgage Program Overview
  • Freddie Mac offers the Home Possible Mortgage Program to help home buyers with limited resources afford mortgages. The Home Possible program enables home buyers to buy a home with a down payment as low as 3.0% of the property purchase price and no minimum borrower financial contribution. The Home Possible program is similar to Fannie Mae’s HomeReady Mortgage Program.

    Typically when you apply for a mortgage only the borrower’s wage income is considered to determine your ability to qualify for a mortgage but with the Home Possible Mortgage Program rental income is also factored into the qualification assessment.  For example if you purchase a single family property and rent out a room, the rental income could help you to qualify for the mortgage.  Additionally, if you purchase a multi-unit property, the rental income from the units you do not live in could help you qualify for the mortgage.

    Borrowers can also combine a Home Possible loan with a personal gift, employer program, down payment grant, closing cost assistance program or qualified subordinated second mortgage to pay for a down payment, closing costs or property renovations, allowing the borrower to purchase a property with no personal financial contribution. Down payment and closing cost assistance grants as well as qualified subordinated second mortgages, also referred to as Affordable Second mortgages, are provided through state or local housing agencies or commissions.

    • Review information on Affordable Seconds and other mortgage assistance programs by clicking STATE PROGRAMS
  • How the Home Possible Mortgage Program Program Works
  • Although Freddie Mac develops and sponsors the Home Possible Mortgage Program, borrowers do not interact with Freddie Mac when they apply for a Home Possible loan.  Instead, borrowers apply for the Home Possible Program through approved lenders such as banks, mortgage banks, mortgage brokers and credit unions.  These approved lenders make sure that applicants meet the Home Possible Program eligibility guidelines and qualify for the mortgage according to Freddie Mac's borrower qualification requirements. Not all lenders offer Home Possible mortgages but many do. Click on a lender in the table below or INTEREST RATES to contact lenders about the Home Possible Program.

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    Rate Details*
    Loan Program:  
    Monthly Payment:  
    APR:  
    Rate:  
    Points  More Info:
    Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
     
    Total Lender Fees:  
    Loan type:  
    Property Value:  
    Loan to Value:  
    Credit Rating:  
    Date Submitted:  
    Monthly Housing Payments
    P & I More Info
    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
    (Estimated)
    Property Tax More Info
    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
    (Estimated)
    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
    (Estimated)
    Homeowner Association Fee More Info
    Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
    Processing Fee More Info
    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
    Underwriting Fee More Info
    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
    Wire Transfer Fee More Info
    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
    (If Any)
    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

    Total Lender Fees
    *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
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    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
  • Home Possible Program Borrower Qualification Requirements
  • Borrowers must meet certain eligibility requirements to qualify for the Home Possible Mortgage Program. We review the key borrower qualification requirements below.

    Credit Score

    The Home Possible program typically requires a minimum credit score of 660 for the purchase of single-family residences with a fixed rate mortgage.  The minimum credit score required for an adjustable rate mortgage (ARM) or refinancing is 680.  The minimum credit score required for a multi-unit property is 700.  We recommend that you review your credit score six months to a year before you start the mortgage process to address potential issues.

    Borrower Debt-to-Income Ratio

    The Home Possible program gives lenders discretion on what debt-to-income ratio to apply in determining what size mortgage a borrower can afford.  In short, a debt-to-income ratio represents the ratio of how much you spend on monthly debt payments such as your mortgage and credit card bills to your monthly gross income.  The higher the debt-to-income ratio used by the lender, the larger the mortgage you can afford.  Under the Home Possible program guidelines, a lender may use a higher debt-to-income ratio for a borrower with a strong credit profile, extended employment history and significant savings while a lender may use a lower debt-to-income ratio for a borrower with a lower credit score, shorter employment history and limited savings.  Although the program has no set figure, most lenders use a debt-to-income ratio of 43% - 45% for program applicants.

    Borrower Income Limit

    Home Possible borrowers may be subject to income limits depending on the location of the property they are financing. Unless the borrower is purchasing a property located in a designated Underserved Area or High Cost Area, a borrower’s annual gross income must be equal to or less than the area median income (AMI). Income limits do not apply to borrowers that purchase a property in an Underserved Area. For properties located in a High Cost Area, the borrower's income can exceed the AMI by a designated percentage, up to 170% of the AMI. For example, if a High Cost Area has an area median income of $100,000, the Home Possible borrower income limit for the area could be up to $170,000 (170% of $100,000 = $170,000).

    Areas are designated as Underserved or High Cost according to Freddie Mac and government guidelines.  Freddie Mac’s Affordable Income and Property Eligibility Tool enables you to determine the AMI and borrower income limit for an area based on property location.

    Home Buyer Education Class

    First-time home buyers are required to take a Freddie Mac-approved homeownership education class and purchasers of multi-unit properties are required to take a Freddie Mac-approved landlord education class.

    First-Time and Repeat Home Buyers

    The Home Possible Mortgage program is available to both first-time home buyers and borrowers who have previously owned a home but the borrower that owns and occupies the property cannot own any other residential properties.

    Borrower Financial Reserves

    The Home Possible program does not require borrowers to hold savings in reserve  at mortgage closing for purchases of single family properties, although FREEandCLEAR recommends that you keep enough savings in reserve to cover three-to-six months of total monthly housing expense.  For purchases of multi-family properties borrowers are required to hold two months of mortgage payments as savings in reserve at mortgage closing.  So if your monthly mortgage payment is $2,000, you would be required to hold at least $4,000 in reserve at the time the mortgage closes.

  • Program Costs and Fees
  • Mortgage Rate

    The interest rate you pay on a Home Possible mortgage depends on several factors including your credit score and loan-to-value (LTV) ratio.  Borrowers with a credit score of 720 and above receive the program’s best interest rate while borrowers with lower credit scores and higher LTV ratios pay higher interest rates, which is a negative of the Home Possible Program. For borrowers with good credit scores, the interest rate for a Home Possible loan is similar to other conventional no and low down payment programs but higher than the interest rate for government-backed programs such as the FHA, VA and USDA mortgage programs. Borrowers should shop multiple lenders to find the Home Possible mortgage with the best terms.

    One unique element of the Home Possible program is that Freddie Mac caps the delivery fees it charges to lenders for borrowers with certain income levels or for properties located in designated areas.  In short, capping delivery fees means that eligible borrowers should pay a lower interest rate.  The delivery fee cap applies when a borrower’s income is less than 80% of the area median income (AMI) or if the property is located in an Underserved Area.  You can use Freddie Mac’s Affordable Income and Property Eligibility Tool to determine if you are eligible for the lower interest rate based on your income level and property location.

    Private Mortgage Insurance (PMI)

    The Home Possible Mortgage Program requires that borrowers purchase private mortgage insurance (PMI), which is an ongoing monthly cost in addition to your monthly mortgage payment.  In short, PMI protects the lender in the event that the borrower defaults on the mortgage.  The amount of PMI the borrower is required to pay depends on the LTV ratio, mortgage program and mortgage length, with the lower your LTV ratio, the lower the required PMI.

    Most conventional low down payment programs require borrowers to pay PMI while the FHA and USDA Mortgage programs require the borrower to pay both an up-front and ongoing mortgage insurance premium (MIP). The Home Possible Program does not require borrowers to pay an up-front PMI fee and the monthly PMI fee is removed when your LTV ratio falls below 78%.  Additionally, in some cases the required monthly PMI fee for a Home Possible mortgage is lower than the monthly mortgage insurance premium for an FHA mortgage.  

    Extra Fees

    Borrowers are required to pay standard lender fees and closing costs with the Home Possible Program.  Aside from a small fee to pay for the home buyer education class, borrowers are not required to pay additional fees to apply for the program.  Borrowers using a down payment grant or closing cost assistance program may be required to pay a separate fee to the housing agency or commission to apply for that program.

    Impound Account

    Along with their mortgage payment, the Home Possible Program requires borrowers to pay property tax, homeowners insurance and private mortgage insurance (PMI) into an impound account on a monthly basis.  An impound account is a trust account controlled by the lender from which expenses such as taxes and insurance are paid when due.  The impound account does not affect the amount of fees the borrower is required to pay for the mortgage.

  • Mortgage Type and Loan Amount
  • Mortgage Program

    Only selected mortgage programs are eligible for the Home Possible program.  Fixed rate mortgages with terms of 30 years or less (the 3% down payment option only applies to fixed rate mortgages) and 5/1, 7/1 and 10/1 adjustable rate mortgages (ARMs) (for single or two unit residences) are eligible while interest only mortgages are not allowed according to program guidelines.

    Maximum Loan-to-Value (LTV) Ratio

    Home Possible program loan-to-value (LTV) ratio limits vary depending on the number of units in the property.  For a single unit property the maximum LTV ratio is 97% and the maximum total loan- to-value (TLTV) ratio if the borrower uses an Affordable Second mortgage is 105%.  For a multi-unit property the maximum LTV and TLTV ratios are both 95%.  TLTV ratio equals the sum of the amounts of all the mortgages on a property divided by the fair market value of the property.  For example, if the property purchase price is $100,000 a qualified borrower can obtain a Home Possible mortgage plus an Affordable Second mortgage for a total loan amount of $105,000.  The borrower can use $100,000 from the two mortgages to purchase the property and $5,000 to pay for the down payment and closing costs.  In this example the TLTV ratio = 105% ($105,000 (total mortgage amount) / $100,000 (property value) = 105%).

    Loan Limit

    The Home Possible program only applies to conforming loan amounts ($424,100 or below for a single unit property in most counties) which limits the size of mortgage you can obtain.

    Mortgage Type

    The Home Possible program applies to home purchase mortgages as well as refinancings.  The program helps borrowers who have limited equity in their property refinance their loan into a new, potentially more affordable mortgage.  Cash-out refinancings are not allowed under the program.

  • Property Eligibility
  • The Home Possible Mortgage Program only applies to owner occupied properties.  You can use the Home Possible program to purchase properties with up to four units, but at least one of the units needs to be owner occupied (lived in by the individual(s) who obtained the mortgage to purchase the property).  The 3% down payment option only applies single unit residences.  Investment properties as well as second and vacation homes are not eligible for the program.

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