Tag: home possible loan

What is a Home Possible Mortgage?

Home Possible is a Freddie Mac mortgage program which allows first-time homebuyers with moderate incomes low down payment mortgage options. These programs only require 3-5% as the minimum down payment and features private mortgage insurance (PMI) that can be canceled once your home equity reaches 20%.

 

How can Home Possible help me?

The Home Possible and the Home Possible advantage programs are geared toward first-time homebuyers with limited funds available for down payments, but meet the rest of the lending criteria. The purpose of both programs is to finance or refinance the purchases of primary residences, 2-4 unit owner-occupied homes, and eligible manufactured properties. Home Possible programs, with backing from Freddie Mac, are able to offer reduced mortgage insurance rates and premiums, more flexible credit terms, and refinancing options for existing homeowners.

 

What are its Main Advantages of Each HP Program?

Home Possible

Home Possible Advantage

Income Limits: The borrower’s annual income cannot exceed 100% of the area median income limits (or higher percentage in designated high-cost areas). No income limits apply if the property is in an underserved area. Eligible Property: A one- to four-unit primary residence or a manufactured home that meets the guidelines. Eligible Mortgages: First-lien, fully amortizing mortgages; fixed rate and adjustable rate loans are allowed. The maturity must not exceed 30 years. LTV and DTI Ratios: Max 95% LTV, DTI Determined by Loan Product Advisor or 45% if manually underwritten.

Income Limits: Loan Product Advisor is used to determine whether the borrower’s income exceeds the product advisor limits. Eligible Property: A 1-unit primary residence. Manufactured Homes not permitted Eligible Mortgages: First-lien, fully amortizing mortgages; fixed rate loans only. Loan term cannot exceed 30 years. LTV and DTI Ratios: Max 97% LTV, DTI determined by Loan Product Advisor or 43% if manually underwritten     Table source: http://www.valuepenguin.com

Commonalities:

• Borrowers must occupy the property as their primary residence.
• Borrowers can not have an ownership interest in other properties.
• Mortgage insurance rates and premiums match in both programs.
• Mortgage insurance can be canceled after loan balance drops below 80% of the home’s appraised value.
• Homeownership education is required for at least one qualifying borrower if all borrowers are first-time homebuyers.

Home Possible Loans Compared to Other loans?

Home Possible vs. FHA Loans

Although each program offers reduced mortgage insurance rates and premiums, which reduces your overall housing expense — with HP loan programs, the mortgage insurance can be canceled once you reach a 78% to 80% loan-to-value ratio. This avoids the expense of refinancing just to eliminate mortgage insurance in the future. In addition, Freddie Mac mortgages aren’t subject to Federal Housing Administation (FHA) county loan limits, which could restrict your purchase options. 

Home Possible vs. VA Loans

Unlike loans from the Department of Veterans Affairs (VA), there’s no funding fee on Home Possible loans. Having fewer upfront costs keeps initial loan balances lower, requires lower monthly payments and less interest over the loan term.

Freddie Mac Home Possible vs. Conventional Loans

Home Possible offers more flexible credit terms than most conventional loans and accepts scenarios on a case-by-case basis which increases the chances that your mortgage application will be approved. HP even allows borrowers without credit scores to qualify based on acceptable automated underwriting results and payment references. 

 

How Do I Qualify for a Freddie Mac Home Possible Mortgage?

• You must meet the debt-to-income ratio requirements for the program. Typically, this means that a maximum of 45% of your gross income goes toward your debts. 
• Your income must fall within the stated guidelines, based on the location of the home. If you aren’t sure, use the eligibility tool on the Freddie Mac website.
• You must also be considered a first-time homebuyer. This doesn’t mean that you’re excluded if you’ve owned a home in the past. There are exceptions for situations like inheriting a stake in a property or acting as a co-signer on a mortgage loan, or if you haven’t been on the title for another property within three years of applying to Home Possible.
• You must complete an approved homebuyer education course. Courses are available online and in-person, and provides valuable information.

 

How Do I Apply for a Freddie Mac Home Possible Mortgage?

• Select a lender who offers Home Possible mortgage products.
• Have the lender calculate your income based on Freddie Mac guidelines by providing the lender with some supporting documentation (like pay stubs, W-2 forms, and bank statements). Going through the preapproval process before home shopping will give you peace of mind.
• Once you know how your income will be considered, work with a real estate agent to identify geographic areas you’d be interested in and confirm that you meet the maximum income requirements by using the eligibility tool.
• Like conventional mortgages, when you have an offer accepted, your income, assets and credit will be reviewed and confirmed, and the property will be appraised to determine its value.