Jan 01, 2019 Once a loan has been approved by Fannie Mae’s Desktop Underwriter® or Freddie Mac’s Loan Product Advisor®, just follow our simple AUS guidelines. Manual underwriting is no longer required. Minimum credit score of 620 for primary residence and second homes. Guidelines are to be followed, and similarly, if final delivery will be to Freddie Mac, Freddie Mac standard guidelines are to be followed (Agency standard as outlined in the Agency Selling Guides available to all lenders without the need for a lender variance or amendment to the lender's master agreement).
New Freddie Mac HomeOne 3% down mortgage program
The Freddie Mac HomeOne mortgage, a new 97 percent loan program, is now available. But, surprisingly, no one is talking about it.
It’s a big deal because restrictions applied to a the 3% down Home Possible program have been removed.
- HomeOne has NO income limits
- HomeOne has NO geographic restrictions (you don’t have to buy in a low-income census tract)
Despite fewer restrictions, the loan only requires a 3% down payment.
This could be the low-down-payment loan home buyers have been waiting for.
Compared to FHA loans, HomeOne may be a better fit for many buyers.
Get started on your HomeOne application here. (Aug 26th, 2019)HomeOne advantages
The advantages of this program are clear. You can make as much money as you want, choose to live anywhere, and still be eligible for 3% down.
The former Freddie Mac program, Home Possible, required the applicant to either 1) make low-to-moderate income, 2) live in an underserved (and potentially undesirable) census tract, or 3) put down 5% to waive these restrictions.
While their income appears high “on paper,” their actual disposable income available to save for a down payment is limited.
HomeOne opens the door for cash-strapped, younger home buyers with higher incomes to break into homeownership.
Many younger buyers — who are new in their careers — probably have student loans. So, while their income appears high “on paper,” their actual disposable income available to save for a down payment is limited.
HomeOne seeks to help this type of prospective home buyer.
Qualifying for HomeOne Freddie Mac 97 percent financing
To be eligible for HomeOne:
- At least one borrower must be a first-time homebuyer
- The property must be a one-unit primary residence including single-family residences, townhomes, and condos
- You need at least 3 percent for your down payment
- Homebuyer education is required
Freddie Mac may consider you a first-time homebuyer even if you have owned property before. If all buyers are first-timers, at least one will have to complete an approved homebuyer education.
However, when you apply for a mortgage program, you don’t just have to be eligible. Eligibility means you are allowed to apply for the loan. Qualifying for the loan means you also meet the lender’s guidelines — credit history and score, assets and income, for instance.
In addition, you must have a usable credit score that will allow the lender to underwrite the loan using Freddie Mac’s automated system. The software will either accept or reject your application, and it only takes a few minutes.
If you get an “accept” recommendation, and your documents match your income and asset information in the application, you can use the program. If your application requires manual underwriting, you are not eligible for HomeOne.
Finally, the property must also meet the lender guidelines and the appraisal must be acceptable to the lender.
HomeOne vs FHA
While FHA mortgages have flexible underwriting guidelines and require just 3.5 percent down, they come with several drawbacks.
- FHA home loans require an upfront mortgage insurance premium (MIP) of 1.75 percent of the loan amount.
- FHA imposes annual mortgage insurance, typically 0.85% of the loan amount per year (about $70 per month for every $100,000 borrowed)
- FHA mortgage insurance cannot be canceled regardless until you refinance into another loan type
HomeOne is better for some borrowers.
- Conventional loans, including Freddie Mac’s HomeOne, does not require an upfront fee
- PMI is cancelable when your loan balance reaches 78% of the home’s value
- You can receive a lower monthly PMI payment than with FHA with a good credit score
However, mortgage insurance could be higher than FHA’s if you have a lower credit score. Ask your lender to compare both scenarios.
In brief, if you have good income, a great credit score, and have been responsible with your finances up to this point, HomeOne will probably suit you better than FHA.
Check more HomeOne requirements with a lender here. (Aug 26th, 2019)What’s the minimum HomeOne credit score?
The program usually requires a credit score of 660 or higher. At least one borrower must have a traditional credit score to qualify (non-traditional credit reports and scores are not allowed for both borrowers).
What is the maximum debt-to-income ratio?
There is no set maximum, but you must have a debt-to-income ratio below 45% in most cases. That means no more than 45% of your gross income can go toward your total housing payment including principal, interest, mortgage insurance, taxes, homeowner’s insurance, and HOA dues.
How does Freddie Mac define “first time home buyer?”
This guideline is actually pretty generous. You may be eligible for HomeOne even if you owned a home in the past. Here’s what can make you eligible:
- You have had no ownership interest in a residential property during the three-year period before buying a home
- Displaced homemakers or single parents may qualify if their only homeownership in the last three years was joint with a former spouse and the home was their primary residence
You can purchase a home with HomeOne if at least one borrower on the loan is a first-time buyer.
Where do I get the required homeownership education?
If all borrowers are first-time home buyers, you will need homeownership education. Freddie Mac’s CreditSmart® training is free and an acceptable education source.
Freddie Mac Manual Underwriting Guidelines Dti
Can I refinance my home using HomeOne?
Yes. You may use HomeOne to refinance if you have at least 3% equity. If you have less than 3% equity, use the Freddie Mac Enhanced Relief Refinance (FMERR).
New and improved Home Possible
Freddie Mac’s Home Possible program, instituted in 2015, increased the availability of conventional (non-government) financing to buyers with small down payments. However, the minimum down payment was 5 percent for most applicants.
Freddie Mac Manual Underwriting Guidelines For Fha
Only those who qualified for Home Possible Advantage could apply for a Freddie Mac 3% down loan. And that meant meeting income restrictions that depended on the local cost of housing. Danny Gardner, a senior vice president with Freddie Mac, said in a National Mortgage News interview that the program had some problems.
For example, a loan could be derailed by a lender finding extra income, for instance, from a spouse. This would push the applicant over the income limit.
“That caused a level of complexity for lenders and consumers to understand those nuances,” Gardner said. “By having a more broad-based product where the metric is whether or not you are a first-time homebuyer makes those other if/then statements obsolete and lenders can be more confident promoting an option for borrowers.”
Apply for HomeOne
Lenders are now accepting HomeOne loan applications. If you’ve been locked out of homeownership due to income restrictions or down payment requirements, now is the time to apply
Get qualified for the HomeOne loan. Start here. (Aug 26th, 2019)Freddie Mac underwriting guidelines are important to you if you're interested in a home loan with a traditional mortgage lender. Many banks sell their loans to this company, which was set up by Congress to help mortgage lenders keep their cash flow open.
The Freddie Mac Underwriting Guidelines
While you can't apply for a loan directly from Freddie Mac, you should know that if you don't fit Freddie Mac requirements, you may have difficulty getting a home loan at the best interest rates. If you do qualify, you can enjoy a pretty competitive rate.
- Fannie Mae Underwriting Guidelines
- What Does Freddie Mac Stand For?
- Non Conforming Loan Underwriting
Guidelines can change every year, or possibly more often than that. That being said, it's important to check Freddie Mac's website for updates before you apply for your mortgage loan. As of May 2010, the following guidelines apply:
- Freddie Mac will buy conforming mortgage loans for single family homes of up to $417,000 in value in most states in the U.S. It will buy loans for up to $625,500 if the home is located in the U.S. Virgin Islands, Hawaii, Alaska or Guam.
- Super conforming loans, also called Jumbo loans, can be for amounts between $417,000 and $729,750 or between $625,500 and $1,094,625 in the states and territories mentioned above. Super conforming loans are only available for financing on housing in specific high cost areas of the country where homes tend to be more expensive.
- Loans for one unit primary residences can be up to 95 percent loan to value without secondary financing.
Keep all of this information in mind when you go house shopping since you will have to find a house that fits into the price range while also ensuring that you have enough money for a down payment to satisfy the loan-to-value requirement. What 95 percent means is that you will have to pay for 5 percent of the amount your home sells for out of your own pocket. You cannot finance it completely with your mortgage loan. You may have to pay the rest as points, which are added to your closing costs.
The loans Freddie Mac buys include fixed rate mortgages with terms of 30, 20 or 15 years and adjustable rate mortgages with 5/1, 7/1 and 10/1 terms. Freddie Mac insures primary residences, investment properties and vacation homes, as long as they contain between one and four units of housing. Financing is also available on new construction or properties that are being renovated. FHA mortgages and mortgages through the Department of Veterans Affairs are not eligible for Freddie Mac coverage.
Find out More about Freddie Mac
It's a good idea to talk to a mortgage broker if you're interested in a Freddie Mac loan and want to learn more about Freddie Mac's guidelines. This person should be able to help you further determine whether or not your mortgage will be eligible under the underwriting guidelines. If the mortgage lender eventually plans to sell your mortgage to Freddie Mac, your eligibility will be important. Remember that some lenders will not approve mortgage loans for applicants who are not eligible under Freddie Mac underwriting guidelines while some will accept these applications but not give the best interest rates to these mortgage loans. Another good resource is a real estate agent, since agents tend to work closely with mortgage companies to get ready for the sale and closing.