Freddie Mac, the government-sponsored Federal Home Loan Mortgage Corporation, offers a specialty mortgage program for first-time, lower-income home buyers, which comes with many benefits over other loan types. It’s called the Home PossibleÔ loan.  Read on to learn more about this program, its features, and qualification requirements.

What is a Home Possible Loan?

Freddie Mac’s Home Possible loan program was created in 2014 to offer a low down payment mortgage option for first-time homebuyers with moderate incomes. It’s a conventional mortgage but only requires a 3% minimum down payment.

As Freddie Mac backs it, the Home Possible loan can also come with reduced mortgage insurance rates and premiums, more flexible credit terms, and even refinancing options for existing homeowners.

The Home Possible loan can be used to purchase or refinance primary residences, two- to four-unit owner-occupied properties, and eligible manufactured homes.

It’s targeted towards those who have limited funds available for a down payment but meet other lending criteria.

How Do You Qualify for a Home Possible Loan?

To qualify for a Freddie Mac Home Possible mortgage, you must meet the following requirements.

Typically, you’ll need a maximum DTI (debt-to-income ratio) of 43% to 45%. This means that percentage of your gross income that goes toward your monthly debts. Freddie Mac’s automated underwriting service may allow for a higher ratio, so it’s essential to consult with a mortgage professional about your specific scenario.

Your income must fall within the stated guidelines, based on the location of the home you are purchasing. You can check your income eligibility using a tool on the Freddie Mac website. This tool considers the median income for households in the area. Certain areas require that your income not be more than 100% of the median income, while other areas don’t have an income limit at all.

You must also be a first-time homebuyer. But this doesn’t mean that you’re excluded if you’ve owned a home in the past. As long as it’s been three years since you’ve had another home loan and/or were listed on the title for another property, you are considered a first-time homebuyer. However, there are exceptions, like inheriting a stake in a property or acting as a co-signer on a mortgage. Regardless of such scenarios, you cannot currently be the resident owner of another property.

Finally, you may be required to complete a Freddie Mac-approved homebuyer education coursebefore the loan closing. Courses are available online and in-person and provide valuable information for homeowners on financial responsibility and other relevant topics.

What are the Advantages of a Home Possible Mortgage?

There are many benefits a Home Possible Mortgage provides over other conventional loans and other low down payment programs, like an FHA loan. Here are the highlights of this mortgage:

  • You can achieve homeownership without having tosave up for and gather a 20% down payment. Down payments as little as 3% are accepted.
  • Your down payment can come from various sources, including family, employer-assistance programs, secondary financing, and sweat equity.In real estate, sweat equity refers to homeowners doing repairs and maintenance on their own rather than paying for traditional labor.
  • You can cancel mortgage insurance when you reach 20% equity on your home. This would eventually reduceyour monthly mortgage payment and potentially save you thousands of dollars over the loan’s life.

Cross Timbers Mortgage offers Home Possible loans to qualified borrowers. Speak to one of our loan advisors to see if this program would make the most sense for your home purchase or refinance.