Freddie Mac Home Possible Loan Requirements
If you’re dreaming of owning a home but don’t have much cash for a down payment, you may be eligible for a Home Possible mortgage from Freddie Mac.
Home Possible offers low down payment requirements, making it easier for low- to moderate income borrowers to buy a home.
What is the Freddie Mac Home Possible Program?
The Home Possible Program is a mortgage program sponsored by Freddie Mac to make homeownership more attainable for first-time and low to middle-income borrowers.
Freddie Mac guarantees the loan for borrowers who meet the qualifying requirements.
Freddie Mac Home Possible Loan Requirements
Home Possible Mortgage Guidelines
To qualify for a Home Possible loan, you must live in the home you’re financing as your primary residence. In addition, it must be a 1-4 unit residence that meets conventional mortgage guidelines.
There is a minimum credit score of at least 620, and your income must be below average for your area.
However, if you earn too much money for Home Possible, don’t worry – other low-down-payment loan programs are available.
Apply for a mortgage, and your lender will determine if you’re eligible for the Home Possible program.
Home Possible does require a homeownership education course, which is easy to do online and can help reduce the risk of default.
Homeownership education is only needed when buying a home, and all borrowers are first-time homebuyers.
The down payment requirement is only 3%, making it much more affordable than the norm of 20% down.
Freddie Mac Home Possible Income Limitations:
Home Possible is a mortgage program designed to be affordable for low- and moderate-income buyers.
Eligibility requirements mandate that the household income of eligible buyers should not exceed 80% of the area median income. By going to the Freddie Mac website, mortgage applicants can easily verify this information to determine whether they meet the income requirements for the program.
With the program’s income limits and other features, Home Possible can provide a viable path to homeownership for those who might otherwise struggle to afford it.
Buyers who earn too much money for Home Possible have other low down payment options, including Fannie Mae’s HomeReady mortgage and government programs such as VA loans, FHA loans, and USDA. More info on this below.
Note: Sellers and real estate agents do prefer conventional loans over government loans.
Freddie Mac Home Possible
Private Mortgage Insurance
Yes, Home Possible requires mortgage insurance, but the type and amount of insurance can vary based on factors such as the loan-to-value (LTV) ratio, property type, and the borrower’s credit score.
Private mortgage insurance (PMI) is generally required for loans with less than a 20% down payment. Borrowers may request a cancellation of mortgage insurance once they have built up sufficient equity in their home.
Who is the Home Possible loan perfect for?
First-Time Home Buyers
The biggest problem for first-time home buyers is the down payment. The Home Possible program eliminates this common barrier by offering a down payment as low as 3%.
Newlywed Couples
If you’ve received enough cash gifts to make the down payment of 3%, then this program is perfect for you. Home Possible allows the down payment to come from gifts.
A recent college graduate
If you’ve just graduated college and have scored a stable job but still may need to use your parents as co-signers, Home Possible is perfect for this scenario.
Non-occupying co-borrowers are allowed on single-unit properties. If using a non-occupying co-borrower, the down payment does increase to 5%.
A renter with roommates
If you are currently renting out your rooms and want to make the jump to homeownership and bring your roommates with you, Home Possible will allow you to use the rent you receive from your roommates as income that can be used towards qualifying for the loan!
Alternatives to the Home Possible Mortgage
Here are other low-down-payment mortgage options from which you can choose.
- HomeReady: Similar to Home Possible. A 3% down payment home loan regulated by Fannie Mae.
- Conventional 97: Another 3% down payment mortgage via Fannie Mae or Freddie Mac. This one is best for buyers with higher credit scores and income.
- FHA Loan: 3.5% down payment mortgage. Best for home buyers with credit blemishes, lower scores, and higher debt-to-income ratios.
- USDA mortgage: 0% down payment mortgage. This loan also has income limitations as well as limitations on the area.
- VA Loan: 0% down payment mortgage, available to active-duty military members and Veterans.
Freddie Mac Home Possible
Difference between Home Possible and Home Ready
| Home Possible | HomeReady | |
|---|---|---|
| Minimum Down Payment | 3% | 3% |
| Minimum Credit Score | 620 | 620 |
| First-Time Home Buyer | No | Yes |
| Income Limitations | Yes | Yes |
| Roommate Income | Allowed | Not Allowed |
| ADU Income | Allowed | Not Allowed |
Cons of the Home Possible Program
Income Limits
The loan borrowers’ income must be at most 80% of the median income for the area where the property is located.
The loan amount is limited.
Since borrowers on the mortgage can only earn 80% of the median income for their area and the maximum debt-to-income ratio (including the Home Possible mortgage) is 43%, your maximum loan limit under the program will be affected by your geographic area, your current income and your existing debt.
Down payment increases
If you plan on using a non-occupying co-borrower, purchasing a manufactured home, or purchasing a 2-4 unit, the down payment increases to 5%.
Final Thoughts on Home Possible
Remember, buying a home is a big decision, so it’s essential to explore all your options and choose the right loan program. With Home Possible, you can achieve your dream of homeownership with a low down payment and affordable monthly payments.
Are you ready to apply? Start the process by completing the form below.