In an attempt to help new home buyers enter the housing marketing in the United States, Freddie Mac has created a new program for first-time home buyers that requires just a 3% down mortgage payment.
Traditionally, that number is 20% for buyers who wish to avoid paying private mortgage insurance. The new program, called HomeOne, will be available in July.
Interested In The 3% down mortgage?
The 3% down mortgage, called HomeOne, complements Freddie Mac’s Home Possible program that focuses on providing mortgages for low to moderate-income buyers. Freddie Mac is making the move in part because rising mortgage rates in the U.S., along with rising home prices, have effectively shut many buyers out of the market, according to Investopedia..
Danny Gardner, a senior vice president at Freddie Mac, said in a news release the HomeOne program “is part of the company’s ongoing efforts to support responsible lending, provide sustainable homeownership and improve access to credit.”
How To Qualify for a 3% Down Mortgage
The HomeOne program is an expansion of the 3% down mortgage Freddie Mac has offered since 2014 for qualified low and middle-income buyers. This will not replace that program. It focuses on first time homebuyers and has no geographic or income restrictions, according to Freddie Mac.
The list of qualifications is extensive. Here are some of the main points.
- The mortgage must be a fixed mortgage
- At least one buyer must be a first-time homebuyer
- The property must be a 1-unit property, which includes condominiums in Planned Unit Developments
- Manufactured homes do not qualify
- At least one borrower must have a usable credit score
Lenders must use Freddie Mac’s Loan Product Advisor to underwrite HomeOne mortgages. The loans cannot be a “super conforming loan.” It also can’t be used for a cash-out refinance, to purchase a second home or to buy an investment property.
The Difference Between Existing 3% Down Mortgages
The current Freddie Mac program offering 3% down mortgages differs in one major way from the existing Home Possible program. With HomeOne, the first criteria is that a first-time homebuyer must be part of the transaction. Income and geographic restrictions do not apply.
That’s not the case with the Home Possible program. While that program has been well-received, it also ran into complications because of restrictions based on income levels. Some restrictions also changed because they were based on specific criteria tied to certain geographic locations.
“HomeOne is a great solution for aspiring homebuyers to grab that first rung of the property ladder and enjoy the financial and social benefits of participating in homeownership,” Gardner said in the release.