March 2019

HomePossible Mortgage: Benefits & Eligibility

HomePossible Mortgage: Benefits & Eligibility

Home Possible is a loan program created by Freddie Mac, with the main feature being a small down payment requirement, generally between 3 and 5 percent. Home Possible mortgages were specifically designed for low to moderate-income homebuyers and are perfect for most first-time home buyers and younger borrowers.

Home Possible Requirements

One of the benefits of the Home Possible program designed to help first-time home buyers is that it doesn’t restrict “move-up” buyers moving out of a starter home into something more family-centric. However, to qualify, you cannot have an existing ownership interest in an existing residential property. So if you are a move-up buyer, you will be required to sell your current home before taking on a Home Possible loan. Fortunately, by closing both the house you’re selling and the home you’re buying on the same day, you still qualify.

You can use a Home Possible Mortgage to either purchase a new home or refinance an existing home, but if you refinance, are forbidden from taking a cash-out. The refinancing process is limited to situations where you can lower either the interest rate or the term of the existing mortgage.

All Home Possible Mortgage customers are required to complete a homeownership course, called CreditSmart, before loan closing. Upon completion of the course, which is free and available online or in-person, the completion certificate is added to your file as one of the required closing documents.

Home Possible Borrower Income Limits

Because Home Possible Mortgages are intended for low to moderate-income borrowers, you must meet area-specific income limits to qualify. Aside from a handful of exception in high-income areas, your income cannot be higher than the Area Median Income (AMI) where the home is located.

If you intend to purchase a home in a rural or underserved area, the borrower income limit does not apply. The best way to find out if these exceptions can benefit you is to contact a Home Loan Expert for information specific to your situation.

Due to the income guidelines, you must demonstrate a steady income that is not expected to change within the next two years. Additionally, you must list all income from all sources to verify that you do not exceed the area-specific income guidelines, even anticipated commission from possible future sales.

Home Possible Down Payments Options

One of the advantages of a Home Possible Mortgage over conventional mortgage products deals with the down payment. As a general rule, the borrow is required to personally pay the down payment with their own funds. But with a Home Possible Mortgage, the three to five percent down payment may be paid by a variety of outside sources. This flexibility means you can close on a new home with zero out-of-pocket funds required.

For a Home Possible Mortgage, you can use any of the following to pay your down payment:

  • Friends and/or family, subject to a gift letter stating the down payment is in fact a gift and not a loan
  • Federal, state or municipal programs that provide down payment assistance, often referred to as Affordable Seconds programs
  • Employee assistance programs from an employer

How to Apply for a Home Possible Mortgage

Applying for a loan is straightforward, but like with all mortgage applications, the process can be confusing and intimidating to many people. To properly maximize the potential of a Home Possible Mortgage, contact a Home Loan Expert to help guide you through the process. 

To get a personalized rate quote in under a minute click here.

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