HomePossible Mortgage Loan | How to qualify?
What is a Freddie Mac HomePossible Mortgage?
HomePossible is a Conventional Mortgage Loan authored by Freddie Mac, a government sponsored enterprise that provides mortgage lenders and banks with standardized underwriting guidelines to approve mortgage loans. When mortgage lenders and banks conform to the underwriting requirements of Freddie Mac, Freddie Mac will then provide a clearinghouse to for mortgage lenders to buy and sell mortgage loans.
The Freddie Mac created the HomePossible Mortgage program to offer qualifying applicants the ability to purchase or refinance a home with easier approval guidelines, and lower interest rates, lower down payments and lower monthly mortgage insurance when required.
On of the core requirements under HomePossible Mortgage loan program is that applicants income can not exceed 80% of the median income (AMI) in their area. By utilizing HomePossible you can arm yourself with knowledge and confidence that your financial future is secure!
In this article we will provide information borrowers will need, such as understanding any requirements and explain each step necessary to apply for this type of mortgage.
What are the requirements for a Freddie Mac HomePossible Mortgage?
The borrower will need to meet certain criteria to qualify for either of these programs. A variety of qualified borrowers exist, and some examples are listed below.
- First time or repeat homebuyers.
- Credit score of 620 or higher.
- Refinance or purchase.
- Rental and supplemental income allowed.
- Complete required education class.
- Meet the income requirements.
- Down payment of 3% of the value of the property.
What are HomePossible Income qualification requirements?
Although borrowers may meet the above specifications, it does not guarantee that they are eligible for a HomePossible loan. Additionally, their income must be within certain criteria to get approved for this mortgage.
Borrowers who want to be qualify for HomePossible, must meet the income cap set by Freddie Mac. Under Freddie Mac underwriting guidelines for HomePossible, applicants income must be equal to or less than 80% of the median income in your county.
In low-income areas, borrowers may not have to worry about HomePossible income limits. Low-income census blocks are places where median household incomes are 20% lower than the region's average median family income.
That said, even if their earnings exceed the eligibility requirements of a HomePossible loan program, they may still qualify for financing!
Income Example: an applicant must make less than $60,000 yearly if their local area has a typical annual income of $75,000.
What Education Requirements that must be met to qualify for a Freddie Mac HomePossible Mortgage?
Borrower who are considering a Freddie Mac Home Ready Mortgage, will have to meet the educational requirements. One of the first-time homebuyer applicants must complete an education program through Freddie Mac's website in order to obtain loan approval. Upon completion, they will have accomplished all criteria for obtaining the mortgage, with exception to the underwriting of income, credit, appraisal and assets.
Discover the Advantages of a Freddie Mac HomePossible Mortgage Loan!
The HomePossible loan offers borrowers the ability to borrow at lower cost for mortgage insurance, lower interest rates and lower down payments compared to a standard conventional mortgage loan. These are great loan programs that promote affordability for lower income borrowers.
The advantages of having a lower cost mortgage, gives homeowners that ability to sustain affordable housing living and enjoy the benefits of homeownership. Historically, owning a home is one of the most effective wealth building tools Americans have access too.
Here are some advantages that come along when applying:
- Rental income may be included as Income.
- Purchase Down Payments at 3%.
- Lower Interest Rates under Freddie Mac HomePossible.
- Lower monthly Private Mortgage Insurance Premiums.
- With flexible financing from the borrower, closing costs and/or down payments can be obtained through a variety of sources. These may include gifts or grants from lenders or other qualified entities without needing to have any personal funds as a minimum requirement.
What are the Loan Terms of a Freddie Mac HomePossible Mortgage Loan?
The mortgage term refers to the length of time a borrower will pay on their mortgage. HomePossible follows the norm of all traditional mortgage terms. Applicants that qualify can choose from a 15, 20, 25, or 30 year mortgage term.
What Types of Interest Rates are Available under HomePossible Mortgage Loans?
Fixed-rate mortgages are a convenient way for borrowers to pay off their loan over a predetermined length of time. From the initial agreement, they will know exactly how much interest and monthly payments will be for the entire loan term. This means that homeowners can manage their monthly expense without any increase to their monthly mortgage payment.
Adjustable Rate Mortgage (ARM) is a home loan with an interest rate that adjusts over time based on the market. ARM's typically start with a lower interest rate than fixed-rate mortgage, but are subject to change as the market changes. While at first glance, an adjustable rate mortgage may be tempting, consider the alternative that interest rates increase and so will the monthly payment.
This interest rate will not last forever. After the initial period their monthly payment may fluctuate periodically. This may cause difficulties with their budget.
How Do Borrowers Apply for A HomePossible Loan?
If after reading and researching the borrowers feel that HomePossible is the ideal option for them, then we are available to assist during the application process. In general loan inquiries for eligibility, pre-qualification, pre-approval and verified pre-approval starts with submitting an online mortgage app using our automated mortgage app.
Review And Compare the Loan Options
Using the online mortgage app, applicants will be provided with a tailored list of pre-qualified loan options that promotes the lowest cost and rate mortgage loan to the top of the loan result query. This means that while the applicant may qualify for HomePossible, if any other loan option exist that provides more financial savings, the applicant select the lowest rate and fee loan.
- Complete the Online Mortgage App
- Compare all Available Loan Options
- Select the desired Loan Options
- Upload the Requested Income and Asset Documents
- Verify Receipt of emailed Pre-Approval Letter
Before the borrower moves forward, they will need to make sure that their income meets the limits, as well as any credit score prerequisites and homeownership education courses that may be necessary.
HomePossible loans are offered through private lenders, such as banks, credit unions and mortgage companies. The borrower will have a wide array of choices since most conventional loan providers offer these mortgages.
They will then complete the necessary application and give any additional documentation needed to verify your income and provide copies of past taxes.
Equifund Mortgage offers a simple application process. Borrowers will be able to upload all of their documentation at the time of applying.
After applying, their lender will check the details to decide if they approve the borrower for a mortgage loan. They'll also set how much money is allocated towards it and what their mortgage rate will be.
Summary of Freddie Mac HomePossible Loan Programs
Freddie Mac HomePossible mortgage loans provide a unique opportunity for those with limited incomes to become homeowners or to refinance. With minimal down payments, highly competitive financing and mortgage insurance rates, plus the chance to get funds for their initial down payment - this loan option is an accessible pathway into home ownership!
Additional programs similar to Freddie Mac HomePossible Loan Program are Fannie Mae HomeReady. These two loan programs have the same underwriting requirements.
- The Federal Home Loan Mortgage Corporation (Freddie Mac) also has a program to assist low to moderate income buyers with similar benefits as the Freddie Mac HomePossible program known as Home Possible. Home Possible and Home Ready adopt the same underwriting requirements.
Please read through this information and if you have questions we are here to assist.
Our expert mortgage officers are available to assist with any questions you may have.
Please call us at 1-866-713-9292 or apply online.
