Buyers looking for a low down-payment loan often turn to FHA loans, which require a down payment of 3.5 percent, or a Fannie Mae HomeReady mortgage, which requires a down payment of 3 percent. Now Freddie Mac has announced its HomeOne mortgage, which also has a minimum down-payment requirement of 3 percent, which will be available beginning July 29.
Only first-time home buyers, which according to the federal definition is someone who has not owned a home in the past three years, will be eligible for the HomeOne loan. However, just one of the borrowers must be a first-time buyer. Unlike Freddie Mac’s Home Possible mortgage program, which also has a low down-payment requirement but is designed for low-to-moderate income buyers, the HomeOne loan does not have income or geographic restrictions.
Borrowers must pass a complete risk assessment by the Freddie Mac Loan Product Advisor that includes factors such as the borrowers’ credit profile, an appraisal of the property and an evaluation of their ability to repay the loan. The HomeOne mortgage is available only as a fixed-rate mortgage that meets conforming loan limits and must be secured by a one-unit primary residence.
Those loan qualification requirements are meant to offset concern about low down-payment loans, which some people think were a contributing factor to the foreclosures during the housing crisis. Freddie Mac’s guidelines make sure that lenders evaluate whether the borrowers are qualified for the loan and can handle the payments. The guidelines also ensure that borrowers avoid the risks of an adjustable-rate mortgage. In addition, each borrower must take a home-buyer-education class.
For information, visit freddiemac.com/singlefamily/factsheets/sell/pdf/homeone.pdf.
Correction: An earlier version of this story incorrectly stated that the Home Possible mortgage program was from Fannie Mae, it’s offered by Freddie Mac.