The Home Possible mortgage program was introduced by Freddie Mac in 2014 to facilitate home ownership 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.
- Borrowers have flexibility in funding their down payments.
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 (AMI). However, 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 take 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 1-4 dwelling units, condos, planned-unit developments, and certain manufactured homes.
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 (EAH) 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 cancelled 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.
Meanwhile, Freddie Mac has decided to postpone the assessment of an “adverse market” fee on refinancing transactions that is designed to recoup estimated losses of $6 billion throughout 2020 and 2021.
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.