Home Possible® Mortgage by Freddie Mac: A Complete Guide for Homebuyers
The Home Possible® Mortgage Program, offered by Freddie Mac, is designed to help low-to-moderate-income borrowers achieve homeownership with flexible credit requirements, low down payments, and reduced mortgage insurance costs. Whether you’re a first-time homebuyer or looking for an affordable mortgage option, Home Possible® can make homeownership more accessible.
This comprehensive guide will cover:
✅ What the Home Possible® Mortgage is
✅ Key benefits and features
✅ Who qualifies for Home Possible®
✅ Income limits and eligibility requirements
✅ Credit score and down payment guidelines
✅ Mortgage insurance details
✅ Homebuyer education requirements
✅ Step-by-step application process
✅ How it compares to FHA and other loan options
✅ Pros and cons of the program
What is the Home Possible® Mortgage?
The Home Possible® Mortgage is a conventional loan program backed by Freddie Mac, designed for low-to-moderate-income borrowers. It allows for low down payments, flexible income sources, and reduced mortgage insurance requirements, making it one of the best financing options for buyers who may struggle to qualify for traditional loans.
Key Features of Home Possible®:
✔ Low Down Payment – Requires as little as 3% down.
✔ Flexible Income Sources – Allows rental income, boarder income, and co-borrowers who don’t live in the home.
✔ Lower Mortgage Insurance (MI) – Reduced private mortgage insurance (PMI) compared to FHA loans.
✔ No First-Time Homebuyer Requirement – Open to both first-time and repeat buyers.
✔ Homebuyer Education – Free homeownership education required for first-time buyers.
✔ Competitive Interest Rates – Offers better rates than FHA loans for borrowers with strong credit.
✔ Multi-Generational Housing Support – Borrowers can use income from non-borrowing household members to qualify.
Who Qualifies for the Home Possible® Mortgage?
To qualify for a Home Possible® loan, borrowers must meet specific income, credit, and property eligibility criteria.
1. Income Limits & Eligibility
- Borrower’s income must be equal to or below 80% of the Area Median Income (AMI) for the home’s location.
- Income from co-borrowers or household members who are not on the loan may be used to qualify.
- Use Freddie Mac’s Home Possible® Income & Property Eligibility Tool to check income limits in your area.
2. Credit Score Requirements
- Minimum credit score: 660
- Higher credit scores (680+) qualify for better interest rates.
- Alternative credit history (such as rent and utility payments) may be considered if no traditional credit is available.
3. Down Payment & Loan-to-Value (LTV) Requirements
- 3% down payment required.
- Can use gifted funds, employer assistance, or down payment assistance programs.
- Maximum LTV of 97% for purchases.
4. Debt-to-Income (DTI) Ratio
- Standard DTI limit is 43%, meaning monthly debts (including the mortgage) cannot exceed 43% of gross income.
5. Homebuyer Education Requirement
- Borrowers must complete a homeownership education course if they are first-time homebuyers.
Eligible Property Types for Home Possible®
✔ Single-family homes
✔ Townhomes
✔ Condominiums
✔ Planned Unit Developments (PUDs)
✔ Multi-unit properties (up to 4 units) – At least one unit must be owner-occupied
🚫 Not eligible: Manufactured homes, second homes, investment-only properties
How Does Home Possible® Compare to Other Loan Programs?
| Feature | Home Possible® (Freddie Mac) | FHA Loan | HomeReady® (Fannie Mae) |
|---|---|---|---|
| Minimum Down Payment | 3% | 3.5% | 3% |
| Credit Score Requirement | 660+ | 580+ | 620+ |
| Mortgage Insurance (MI) | Reduced MI, cancellable at 20% equity | Higher MI, required for the life of the loan | Similar to Home Possible® |
| Income Limits | Yes (80% AMI) | No limits | Yes (80% AMI) |
| First-Time Homebuyer Requirement | No | No | No |
| Down Payment Assistance Allowed? | Yes | Yes | Yes |
| Multi-Generational Income Allowed? | Yes | No | Yes |
🔹 Best for: Borrowers with moderate credit, low income, and flexible income sources.
Mortgage Insurance (MI) for Home Possible® Loans
Unlike FHA loans, which require mortgage insurance (MI) for the life of the loan, Home Possible® mortgages allow MI to be canceled once the borrower reaches 20% equity.
MI Cost Savings with Home Possible®
- Lower MI rates than FHA
- Automatically removed at 20% equity
- No upfront mortgage insurance premium (UFMIP) like FHA loans
Real-Life Examples of Home Possible® Borrowers
Example 1: First-Time Homebuyer with Low Down Payment
- Borrower Profile:
- Single borrower, $55,000 annual income
- Home price: $250,000
- Loan amount: $242,500
- Down Payment: $7,500 (3%)
- Result: Approved with a Home Possible® mortgage due to flexible income limits.
Example 2: Self-Employed Borrower Using Rental Income
- Borrower Profile:
- Self-employed, income $45,000/year
- Owns multi-unit property
- Used rental income from one unit to qualify
- Result: Approved under Home Possible® guidelines, which allow rental income consideration.
Example 3: Multi-Generational Household
- Borrower Profile:
- Family of three living together
- Primary borrower earns $50,000/year
- Parent living in home earns $25,000/year
- Used combined household income to qualify
- Result: Approved because Home Possible® allows boarder income.
Step-by-Step Guide to Applying for a Home Possible® Mortgage
1️⃣ Check Your Income Eligibility – Use Freddie Mac’s Home Possible® Eligibility Tool.
2️⃣ Improve Your Credit Score – Aim for 660+ for approval and 700+ for better rates.
3️⃣ Save for a Down Payment – Minimum 3% down required (can use gift funds).
4️⃣ Complete Homebuyer Education – Required for first-time buyers.
5️⃣ Get Pre-Approved – Work with a lender offering Home Possible® loans.
6️⃣ Find a Home – Ensure it meets Home Possible® property requirements.
7️⃣ Submit Application & Documents – W-2s, bank statements, rental income proof (if applicable).
8️⃣ Close on Your Loan – Sign documents and move into your new home!
Final Thoughts: Why Choose a Home Possible® Mortgage?
The Home Possible® Mortgage Program by Freddie Mac is one of the best low-down-payment mortgage options available. With flexible income guidelines, reduced MI costs, and support for multi-generational households, it provides an affordable path to homeownership for many Americans.
💡 If you meet the income limits and want a lower-cost mortgage with a small down payment, Home Possible® could be the perfect solution!
🔹 Ready to get started? Contact a Home Possible® lender today to explore your eligibility.