The Home Possible mortgage program was introduced by Freddie Mac in 2014 to facilitate homeownership among very low to moderate-income borrowers. Down payments can be as low as 3%, and qualified borrowers can include applicants without credit scores. A broadly similar program from Fannie Mae is called HomeReady.
- Home Possible is a Freddie Mac program for low and middle-income borrowers.
- It offers low down payments, low fees, and low mortgage insurance requirements.
- Different types of residences are eligible for mortgages through Home Possible.
- Borrowers have flexibility in funding their down payments.
- The program allows lenders to expand their pool of borrowers.
There are no income limits in low-income census tracts. In other census tracts, eligible borrowers will earn no more than 100% of the area median income. In some cases, the income limit may be 80% of AMI.
Borrowers without a credit score may qualify for a Home Possible mortgage if the loan-to-value (LTV) ratio on the property does not exceed 95%. The program is not limited to first-time homebuyers. In cases where a group of borrowers takes out the loan, at least one must occupy the property as his or her primary residence.
A wide variety of residence types are eligible for Home Possible mortgages. These include houses with one to four dwelling units, condos, planned-unit developments, and certain manufactured homes.
Upfront fees on Fannie Mae and Freddie Mac home loans changed in May 2023. Fees were increased for homebuyers with higher credit scores, such as 740 or higher, while they were decreased for homebuyers with lower credit scores, such as those below 640. Another change: Your down payment will influence what your fee is. The higher your down payment, the lower your fees, though it will still depend on your credit score. Fannie Mae provides the Loan-Level Price Adjustments on its website.
Benefits For Borrowers
In addition to personal funds, borrowers can use various other sources to meet their required 3% down payment. Among these are gifts from related persons, funds from a governmental or non-governmental agency, employer-assisted homeownership programs, and Affordable Seconds. In some cases, sweat equity also may be a way to meet the down payment. The Affordable Seconds program is a Freddie Mac initiative to assist homebuyers with down payments and closing costs.
Mortgage insurance can be canceled if the LTV ratio falls below 80%, and coverage requirements are reduced for LTV ratios above 90%. For loans with an LTV ratio above 80%, credit fees are capped and are less than standard fees.
Freddie Mac eliminated the assessment of an adverse market fee on refinancing transactions for loans as of Aug. 1, 2021. The goal of the fee was to recoup billions in losses as a result of the COVID-19 pandemic. Fannie Mae also made the decision to eliminate the fee.
Benefits For Lenders
Freddie Mac promotes Home Possible to lenders as a means to expand their market opportunity, giving them greater access to "borrowers in a wide range of life stages from millennials purchasing their first home, to move-up borrowers and retirees considering downsizing." Additionally, lenders are able to sell their Home Possible mortgages to Freddie Mac.