Freddie Mac is making it easier for borrowers without the traditional 20% down payment to get a mortgage, announcing that it is launching a new 3% down payment mortgage program. Last week, the McLean, Virginia-based lender announced HomeOne mortgage, a new conventional mortgage program that requires a 3% down payment.
The program, which provides non-Federal Housing Authority-backed loans, is available for qualifying first-time homebuyers. The new program complements Freddie Mac's existing Home Possible mortgage product that provides home loans to customers with low to moderate incomes. The HomeOne mortgage product will be available as of July 29, 2018.
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"Freddie Mac's HomeOne mortgage is part of the company's ongoing efforts to support responsible lending, provide sustainable homeownership and improve access to credit," said Danny Gardner, senior vice president of single-family affordable lending and access to credit at Freddie Mac, in a press release. "The HomeOne mortgage will provide our customers the flexibility they need to help borrowers anywhere in the country achieve the milestone of homeownership and overcome the common down payment resource hurdle."
The move on the part of Freddie Mac comes as rising mortgage rates, coupled with increasing home prices, are shutting all sorts of buyers out of the real estate market. With concerns mounting that the current spring real estate season will be lackluster given the dearth of affordable properties and price wars that are breaking out in some areas of the country, the lenders have been stepping up ways to get new borrowers into a home.
In addition to announcing the HomeOne product, Freddie Mac said that it is adjusting the area median income limits for Home Possible, another one of its loan products. The lender is now more sharply focused on low- and moderate-income buyers, with income limits capped at 100% of the area-median income. Low-income census tracts will continue to have no limits, Freddie Mac said in the press release.
The announcements on the part of Freddie Mac come as mortgage rates hit a five-year high last week. According to Freddie Mac, for the week ending April 26, rates jumped 11 basis points to 4.58% for a 30-year fixed-rate home loan. It marked the third week in a row of increases and brought rates to the highest level since the week of Aug. 22, 2013. "Higher Treasury yields, driven by rising commodity prices, more Treasury issuances and the steady stream of solid economic news, are behind the uptick in rates over the past week," Freddie Mac wrote in a press release last week.