HomeOne Mortgage Program Pros and Cons
The HomeOne Program is similar to other no or low down payment mortgage programs but offers several unique advantages for borrowers. In additional to requiring a minimal down payment, the program does no impose borrower income limits or geographic restrictions on where the property being financed is located. Some low down payment programs cap how much money an applicant can earn or apply different qualification requirements or mortgage rate pricing depending on where the property is located. The HomeOne Mortgage program does not apply these limitations which means more people are eligible for the program.
The are also multiple considerations you should keep in mind with a HomeOne Mortgage. First, the program applies loan limits which limit your mortgage amount. Applicants must also be first time home buyers to be eligible for the program although the definition of first time home buyer is somewhat flexible. The program can only be used to purchase or refinance a single family property and borrowers with no credit score or non-traditional credit profiles are not eligible for the HomeOne Program.
We outline all of the positives and negatives of the HomeOne Program below. Read on to determine if it is the mortgage right program for you.
HomeOne Mortgage Program Pros
Ability to Buy a Home with a Low Down Payment
The HomeOne Mortgage Program requires a down payment of only 3% to purchase a home. This is lower than the 3.5% down payment required for an FHA loan and comparable to other low down payment programs. Saving enough money for a down payment is one of the biggest obstacles to buying a home so this is one of the key benefits of the HomeOne Program.
No Borrower Personal Financial Contribution Required
You can combine a HomeOne loan with a down payment assistance program, closing cost grant, gift, employer program or qualified second mortgage, also known as an Affordable Seconds mortgage, to pay your down payment and closing costs, which enables you to purchase a property with no personal financial contribution. In short, this program feature enables you to buy a home, and potentially pay for your down payment, closing costs and minor property renovations, without paying money out of your pocket. The ability to buy a home without using any personal funds makes owning a home more affordable and attainable.
No Borrower Income Limit
The HomeOne Program does not apply borrower income limits which means all are applicants are eligible, regardless of how much money you make. Some other low down payment programs apply income limits which means they are not accessible to some borrowers. Eliminating borrower income limits enables more borrowers to qualify for the HomeOne Program.
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No Property Location Restriction
Some low down payment programs require that the property being financed is located in a certain area or apply different qualification requirements, such as borrower income limits, depending on where the property is located. The HomeOne Program does not impose any property location restrictions which simplifies the program for applicants and makes more properties eligible.
No Borrower Reserves Required
Although we recommend that borrowers hold three-to-six months of total monthly housing expense as savings in reserve when your mortgage closes, the HomeOne Program does not impose a reserve requirement on applicants. This reduces the amount of funds required to qualify for a HomeOne mortgage and buy a home.
HomeOne Mortgage Program Cons
Loan Limits
The HomeOne Program limits the size of mortgage you can obtain through the program. The program uses the conforming loan limit, which is $726,200 for a single unit property in the contiguous United States and $1,089,300 in Hawaii and Alaska. Additionally, unlike some other low down payment programs, super conforming mortgagees -- higher loan limits for counties with higher housing costs -- are not allowed. People who live in areas with higher housing costs may find that the mortgage limits reduce their housing options.
First Time Home Buyer Requirement
At least one borrower is required to be a first-time home buyer which means repeat home buyers may not be eligible for the program. A first-time home buyer is usually defined as someone who has not owned a home for at least two years so you still may qualify for the program even if you previously owned a home.
Private Mortgage Insurance
Borrowers who make a down payment of less than 20% -- which is the majority of program participants -- are required to pay private mortgage insurance (PMI), which is an extra cost in addition to your monthly mortgage payment. The amount of PMI you are required to pay depends on your credit score, loan-to-value (LTV) ratio and the length of your loan. Most low down payment mortgage programs require borrowers to pay PMI but it is an additional costs borrowers should keep in mind when determining what size mortgage they can afford.
Restrictions on Property Type
Only single unit properties such as homes, condos, co-ops and units in a planned unit development are eligible for the HomeOne Program. Multi-unit properties, rental properties and second homes do not qualify for the program. Additionally, the property must be the applicant's primary residence. Please note that other low down payment programs including the FHA, HomeReady and Home Possible programs allow multi-family properties with up to four units.
Borrowers with No Credit Score or Non Traditional Credit Profiles Are Not Eligible
Borrowers with no credit score or a limited credit history are not eligible for the HomeOne Mortgage Program. This means that fewer credit-challenged borrowers are eligible for the program. Other low down payment programs including the HomeReady Program and Home Possible program allow the use of non-traditional credit profiles for borrowers with little or no credit histories. Borrowers should check their credit report and score six months prior to applying for a mortgage to identify and address any issues.
More FREEandCLEAR Resources
HomeOne Mortgage Guide
We provide a comprehensive overview of the HomeOne Mortgage Program including eligibility, applicant qualification requirements, loan limits and other important program information.
Mortgage Rates
HomeOne mortgages are offered by traditional lenders such as banks, mortgage brokers, mortgage banks and credit unions. Use our rate tables to contact lenders in your area to determine if they offer the HomeOne Program and to view customized mortgage rates and closing costs. Shopping multiple lenders and comparing loan quotes is the best way to save money on your mortgage.
Comparison of Low or No Down Payment Mortgage Programs
Review and compare multiple conventional and government-backed low or no down payment mortgage programs to understand key program features and qualification requirements.
Ask a Mortgage Expert
Use our Ask an Expert feature to ask any mortgage question you have. The feature is free to use and you receive free expert advice within one business day.
Sources
"HomeOne." Pub Number 1057. Freddie Mac, July 2018. Web.