Freddie Mac HomeOne vs Freddie Mac Home Possible Programs - Whats the Difference?

Freddie Mac HomeOne vs Freddie Mac Home Possible Programs –  What’s the Difference?

If you don’t have a large down payment, yet you have ‘good’ credit, you may qualify for a  conventional loan sooner than you think. Freddie Mac has two programs, both of which require  just a 3% down payment.  

In this guide, we’ll look at Freddie Mac HomeOne vs Freddie Mac Home Possible programs to  help you determine which option is right for you.  

What is Freddie Mac HomeOne?

The Freddie Mac HomeOne program requires just 3% down but doesn’t have any income  limitations. In other words, it’s open to any borrower that meets the following:

• First-time homebuyer  

• The property must be a single unit (home, townhome, or condo)

• You must undergo homebuyer education

As far as credit scores, you’ll need decent credit. Usually, credit scores of 660 or higher are  accepted, but it varies based on your other qualifying factors. If you are ‘eligible’ for the loan,  this means you can apply for it, but then you must prove you can afford the loan and qualify for  it.

Besides a 660 credit score, you must meet the following:

• A maximum debt-to-income ratio of 45% (your total monthly debts must take up less  than 45% of your gross monthly income)

• Stable income and employment for 2 years

• Proof you have at least 3% of the purchase price for a down payment

What is Freddie Mac Home Possible?  

Freddie Mac Home Possible is similar to the HomeOne program with one large exception – there are income limitations. You can make too much money and not be eligible for the Freddie  Mac Home Possible loan.

In Harris County, the income limit for 2021 is 64,000. If you make less than 64,000, you can  apply for the Home Possible loan, which offers the following benefits:

• No 20% down payment requirements – you can put down just 3% and qualify

• Non-occupying co-borrowers may contribute to your down payment  • You can buy 1 – 4 unit properties

• Available in a variety of mortgage terms including ARMs and fixed-rate loans

Click here if you're looking to get an instant mortgage pre-approval with competitive interest rates and fees! 

Like the HomeOne program, Home Possible requires just 3% down, and the down payment can  come from a variety of sources. Another major difference, however, is you don’t have to be a  first-time homebuyer. Anyone who makes less than 64,000 in Harris County may be eligible.

First-time homebuyers may use the program, of course, but it’s also great for those who need  non-occupying co-borrowers or borrowers who need to use boarder income to qualify for the  loan.

Like HomeOne, you’ll need to meet specific requirements including:

• A maximum debt-to-income ratio of 45% (your total monthly debts must be less than  45% of your gross monthly income)

• Stable income and employment for 2 years

• Proof you have at least 3% to put down (can come from other sources)

Freddie Mac Loan Mortgage Pre-Approval  

Before you look at homes, it’s always a good idea to get a mortgage pre-approval letter first. A pre approval does two things – it lets you know that you can afford a loan and how much you can  afford. Would you go shopping for a car without knowing how much you could spend? The  same is true of a house – why waste time looking at homes you can’t afford?

A pre-approval is a conditional approval. We’ll pull your credit to see if you qualify for either of  the Freddie Mac loans and ask for proof of your income, assets, and any other information you  can provide. The more information you can provide at the pre-approval stage, the more  accurate your pre-approval letter will be.

A mortgage pre-approval letter is what sellers and real estate agents look for when you want to  see a home. They want to deal with approved home buyers – buyers who they know are serious  about buying the home and aren’t just wasting their time.

The pre-approval letter tells sellers:

• How much house you can afford

• What conditions you must satisfy to get the funding

• The type of loan you’re securing

With this letter in hand, sellers will take your bid seriously – without it, they may reject any  offers you make. It takes only a little work, and that piece of paper can provide you with  incredible power when you’re looking at homes.

Get an instant pre-approval fast or check out todays interest rates

How to Apply for a Mortgage Loan with Freddie Mac  

After the pre-approval, it’s time to shop for a home! That’s the exciting part, which is why  getting pre-approved is so important. With your letter in hand, you know what price range to  stick to and which homes you can afford.

Once you find a home for sale and make an offer. You may go back and forth with the seller with your negotiations. Once you agree on a price and the conditions of the sale, you’ll sign a purchase  contract with your Houston realtor. This is what starts the rest of the Freddie Mac loan application process.

Since you’re already pre-approved, all we need is the following to complete the process:”

• Signed sales contract (by all parties)

• Documentation for any outstanding conditions listed in the letter

• Appraisal for the home

• A title search for the home

• Proof of homeowner’s insurance

Once we have all documentation, we can complete the underwriting process ensuring the  home is a good risk, aka worth at least as much as you offered to pay. We’ll also ensure there  aren’t any outstanding liens on the property.  

How does the FHA Loan Compare?  

Many first-time homebuyers assume the FHA loan is best and it’s a great option too. You don’t have to be a first-time homebuyer or meet any income limits. The FHA mortgage loan is a flexible loan for  borrowers with less-than-perfect credit and 3.5% to put down on a home.

It sounds similar to the Freddie Mac loan, but it’s more forgiving with credit scores. You need  only a 580 credit score to get an FHA loan and your down payment can come from several  sources, not just your funds.

FHA loans don’t require homebuyer education, but they do require mortgage insurance both  upfront and annually. Upfront the FHA charges 1.75% of the loan amount, which can be rolled  into your loan balance. That’s 1,750 for every 100,000 you borrow. They also charge 0.85% of  the loan amount annually (the amount decreases each year as you pay the loan down).

Freddie Mac loans – both HomeOne and Home Possible charge PMI (Private Mortgage  Insurance) but only until you owe 78% or less of the home’s value. At that point, the PMI is  canceled. FHA mortgage insurance lasts for the life of the loan.

Bottom Line  

If you have less than 20% to put down on a home, you have many options and Freddie Mac  offers two.

Before you decide which loan is right for you, look at your credit. If you have good credit, the  Freddie Mac loans are a great option. They offer competitive interest rates and cancelable PMI  once you pay the loan down far enough. When you compare Freddie Mac HomeOne vs Freddie  Mac Home Possible programs, think of your income and whether or not you’re a first-time  homebuyer to choose the right program.

If you have mediocre credit, the FHA loan may be a better option. It offers competitive rates  too, but you’ll pay mortgage insurance for a longer period, so keep that in mind. Either way,  you can get a flexible loan that allows you to become a homeowner much faster than any other  loan program would allow.  

If you have any questions or would like to know if Freddie Mac HomeOne or Freddie Mac Home  Possible is a good program for you please don’t hesitate to reach out to call, text, or email me.

Alexandre Murphy

Houston Mortgage CEO

amurphy@houstonmortgageloans.com

Please call or text me at 832-815-9754

I look forward to helping you buy a wonderful home soon.