Home Possible Mortgage

Unlocking Homeownership with the Home Possible Mortgage Program

Introduction to the Home Possible Mortgage Program

Homeownership remains a cornerstone of the American Dream, yet for many, the path to owning a home can seem daunting, especially when facing financial constraints. Enter the Home Possible mortgage program, a brainchild of Freddie Mac launched in 2014. This innovative program aims to break down barriers to homeownership, particularly for those with very low to moderate incomes. With down payments plummeting to as low as 3%, and a unique approach to credit evaluation, the Home Possible program stands out as a beacon of hope for aspiring homeowners.

Freddie Mac vs. Fannie Mae: A Quick Comparison

While Freddie Mac's Home Possible program has gained traction, it's worth noting that it's not alone in this space. Fannie Mae offers a program dubbed 'HomeReady,' which bears striking similarities to Home Possible. Both programs cater to low and moderate-income borrowers, aiming to make homeownership more accessible through flexible terms and requirements.

Diving into Eligibility Criteria

When it comes to eligibility, the Home Possible program casts a wide net, encompassing a diverse range of borrowers. In low-income census tracts, there are no income restrictions. However, in other areas, borrowers typically shouldn't exceed 100% of the area median income (AMI), although some scenarios might peg this limit at 80% of AMI.

One of the standout features of this program is its flexibility towards credit scores. Believe it or not, borrowers without a credit score can still qualify, provided the loan-to-value (LTV) ratio doesn't surpass 95%. It's also worth noting that this program isn't exclusive to first-time homebuyers. In instances where multiple borrowers are involved, at least one must make the property their primary residence.

Perks Galore: Benefits for Borrowers

The Home Possible program isn't just about easing financial constraints; it's about offering borrowers a plethora of benefits. Beyond personal savings, borrowers can tap into a variety of sources to cobble together their 3% down payment. These range from gifts from family members, grants from governmental or non-governmental agencies, to employer-assisted homeownership (EAH) programs, and even sweat equity in some cases.

The Affordable Seconds program, a Freddie Mac initiative, is another feather in the cap for this program. It's designed to aid homebuyers by covering down payments and closing costs, providing an extra layer of financial support.

Moreover, the program offers attractive terms when it comes to mortgage insurance. As the loan-to-value (LTV) ratio dips below 80%, borrowers can bid adieu to mortgage insurance. Plus, for LTV ratios exceeding 90%, there's a reduction in coverage requirements. Additionally, credit fees are capped for loans with an LTV ratio over 80%, making it a more affordable option for many.

A Win-Win for Lenders

It's not just borrowers who stand to benefit from the Home Possible program; lenders too have much to gain. Freddie Mac pitches this program to lenders as an avenue to broaden their market reach, providing access to a diverse clientele spanning millennials buying their first home to retirees looking to downsize. What's more, lenders can offload their Home Possible mortgages to Freddie Mac, further enhancing their liquidity and risk management.

Navigating the Road Ahead

While the Home Possible program offers a slew of benefits, it's essential to stay abreast of the evolving landscape. Freddie Mac's decision to defer the imposition of an adverse market fee on refinancing transactions, aimed at recuperating projected losses of $6 billion between 2020 and 2021, underscores the dynamic nature of this program.