Posted on April 16, 2015 by - Buying a Home, FHA Mortgage, First Time Home Buyer

Buy a Home with only a 3% down payment with Freddie Mac’s 97% Home Loan!

Freddie Mac Offers Alternative to FHA loan
If you are a first-time home buyer or struggle to come up with a conventional down payment for a house, the FHA Loan is no longer your only option. Freddie Mac’s new Home Possible Advantage program is a conventional loan option that adds another possibility to the low down-payment offerings.

Related: Fannie Mae HomeReady 97% financing

Freddie Mac Home Possible is available to all first-time home buyers and those with moderate to low income levels. The type of Home Possible loan you choose depends on your property.

What is the Freddie Mac Home Possible Loan Program?

Home Possible, available December 2014, requires a 5% down payment for those buying a 1-to-4 unit primary residence, condo, PUD (planned unit development), or manufactured home.

Home Possible Advantage, available March 2015, requires a 3% down payment and is only available to those buying a 1-unit primary residence, condo, or PUD.

Mortgage options also vary for the two Home Possible programs:

  1. Home Possible includes fixed-rate mortgages, Adjustable Rate Mortgages for 1 or 2-unit primary residences that are not manufactured homes, and renovation mortgages.
  2. Home Possible Advantage includes fixed-rate mortgages, and renovation mortgages.

To qualify for Home Possible Advantage, you must have a credit score of at least 660. If you are a first-time home buyer, you also must participate in a home borrower education program, such as Freddie Mac’s CreditSmart.

Benefits to the Freddie Mac 97 Home Loan

The largest benefit to the Freddie Mac 97% home loan is the flexibility in down payment options. While a 5% down payment may offer slightly better loan terms, a low down payment mortgage may be a good fit for many homebuyers.

Other Benefits Include:

  • Low Total Mortgage Payments
  • The down payment may be 100% gifted from a family member
  • Lower PMI payments for high credit score borrowers
  • PMI can be removed with sufficient home equity whereas FHA mortgage insurance is permanent
  • Less property condition restrictions compared to FHA requirements
  • Quicker Loan Closings

Which program should I choose for my home purchase?

What’s the difference between Home Possible, Fannie Mae’s 3% down program, and the FHA loan, and which one is right for you? It depends on your financial situation, the property you want to purchase, the requirements of each institution, and your lender’s preferences.

With an FHA loan, you have to put down at least 3.5% of the total home value. Fannie Mae requires a 3% down payment, and Freddie Mac’s Home Possible requires 3% or 5%, depending on the type of property you’re buying.

Whichever option you choose, you’ll have to pay private mortgage insurance (PMI). Anytime you offer a low down payment of less than 20% of the home’s value, you have to pay to insure the lender against default.

For the FHA loan, you’ll have to pay an upfront PMI fee and a monthly fee, which never goes away. If you choose a Freddie Mac or Fannie Mae loan, you can choose between paying an upfront fee with a slightly higher interest rate or a monthly fee, which goes away once you pay 20% of your total loan value.

The Freddie Mac and Fannie Mae 3% down programs are similar but have slightly different regulations, so check with your lender to see which one might be a better fit for your circumstances.

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    For more information on Freddie Mac Home Possible, visit http://www.freddiemac.com/homepossible/hp.html.

     

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