The HomeOne loan makes it easier to buy a home
Saving for a down payment is one of the biggest hurdles for first-time home buyers.
Fortunately, there are a number of low and even no down loan options. The Freddie Mac HomeOne Loan is one such program.
HomeOne allows you to buy a home with just 3% down payment. And it has more flexible eligibility criteria than many programs, making it an attractive option for first-time home buyers.
Check your eligibility for the 3% down payment mortgage. Start here (December 5, 2021)
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What is the Freddie Mac HomeOne loan?
Launched in 2018, the Freddie Mac HomeOne Mortgage is designed to make financing more accessible to potential buyers as well as homeowners looking to refinance.
With its lenient underwriting guidelines, the HomeOne Loan can be a great choice for low- to moderate-income borrowers.
“This loan is mainly aimed at first-time buyers who do not have a lot of disposable income but who wish to enter the market with a small down payment”, explains Leonard Ang, CEO of iPropertyManagement.
“This loan is mainly intended for first-time buyers who do not have a lot of disposable income but who wish to enter the market with a low down payment.”
It is important to note that Freddie Mac is not a mortgage lender.
Rather, it is a government-sponsored agency created to help middle and low-income Americans buy homes.
âFreddie Mac doesn’t offer loans like HomeOne to buyers directly. Instead, Freddie Mac buys pool mortgages from banks and other lenders who offer home loans to borrowers, ânotes Imani Francies, mortgage expert at Loans.org.
This means that you can get a HomeOne mortgage from any mortgage lender that offers Freddie Mac programs (which most do). And you have the option of shopping around for your lowest interest rate.
Find your lowest mortgage rate. Start here (December 5, 2021)
About the HomeOne mortgage
One of the main benefits of a HomeOne mortgage is that it allows you to buy real estate with as little as 3% down. This is a huge advantage over other conventional loan programs which may require 5%, 10% or even 20% down payment.
Another advantage is that there are no geographic limits on where you can buy a home using a HomeOne loan. There are also no income limits attached to this funding.
- You are allowed to buy single unit properties with a Freddie Mac HomeOne loan
- Eligible property types include a single-family home, townhouse, or condominium
- The approval process is less strict than for other types of loans
- The rent you receive from a roommate or a cross-border worker can count up to 30% of your income used to benefit from this loan.
However, by opting for a HomeOne mortgage, you will have to pay for private mortgage insurance if your loan-to-value ratio (LTV) is above 95%, according to Freddie Mac. This means that the PMI is required whenever you put less than 5% of a stake.
Additionally, if you choose to refinance through the HomeOne loan program, you are not allowed to withdraw any money.
âFreddie Mac makes this program available through participating lenders, such as banks, mortgage lenders, mortgage brokers and credit unions,â adds Francies.
HomeOne eligibility conditions
To be eligible for a HomeOne loan, you must meet the following criteria:
- At least one borrower must be a first-time buyer if this loan is intended for the purchase of a home
- The property must be a primary residence to one unit (which may include a single family home, townhouse or condo)
- You must pay at least 3 percent of the purchase price
- Your loan amount must be within the conforming loan limits
- If all borrowers are first-time home buyers, at least one borrower must complete a homeownership education program before the mortgage date
- All borrowers must occupy the mortgaged premises as their primary residence
Note that the definition of a âfirst-time home buyerâ is not as strict as it sounds. Anyone can be considered a first-time buyer as long as they haven’t owned a home in the past three years.
So even if you owned a home before, but rented for a few years, you may be eligible for your next home purchase through the Freddie Mac HomeOne program.
Check your eligibility for the 3% down payment mortgage. Start here (December 5, 2021)
HomeOne Income Limits
One of the best features of the Freddie Mac HomeOne Loan is that there is no income limit to qualify. This makes the program more accessible than some other 3% loans.
âThere is no income limit, but at least one borrower must have a good credit rating,â says Lyle Solomon, senior lawyer at Oak View Law Group.
Also be aware that the maximum Debt-to-Income Ratio (DTI) for a HomeOne loan is 45%, the maximum LTV is 97%, and the minimum credit score that many lenders seek is usually 620.
Freddie Mac HomeOne vs. Home Possible
Freddie Mac supports another loan program called Home Possible. Like HomeOne, it offers loans starting at just 3% on single-family homes.
However, Home Possible is only available to anyone who earns less than 80% of the average monthly income for the zip code they will be shopping in. A minimum FICO credit score of 660 is generally required and your DTI cannot exceed 43-45%. .
This means that it is a little easier to qualify for a HomeOne loan than a HomePossible loan.
Plus, with a Home Possible mortgage, you can qualify with the income of a relative or someone else who agrees to co-sign the loan with you. But at least one homeowner must participate in a homeownership education program if you are buying a home that all occupant borrowers will be first time buyers.
Alternatives to the HomeOne mortgage
Not everyone will qualify for a HomeOne loan. And even if you qualify, a different loan program might be better suited to your situation. So be sure to explore all of your options.
If you’re looking for a low down payment mortgage, here are some great alternatives to the Freddie Mac HomeOne program:
- Fannie Mae Home Ready loan – Requires 3% reduction, 620-680 FICO minimum credit score, 50% maximum DTI, 97% maximum LTV, annual income cannot exceed 100% of median area income (AMI)
- Conventional loan 97 (courtesy of Fannie Mae and Freddie Mac) – Requires 3% down payment, FICO credit score of 620-660 minimum, maximum 50% DTI, LTV ratio of 97% maximum
- FHA loan – Requires 3.5% down payment, 580 minimum FICO credit score, 43% maximum DTI ratio in most cases
- USDA loan – Requires a minimum 640 FICO credit score, a maximum of 41% DTI, annual income cannot exceed 115% of your region’s median income, must buy in eligible rural areas.
- VA home loan – Requires 0% down payment, 580-660 minimum FICO credit score, 41% maximum DTI, must be a qualified veteran, active duty member or spouse of a veteran
Confused About Which Loan Is Right For You? Your loan officer can help you explore your options and make a decision.
Freddie Mac HomeOne FAQ
The HomeOne mortgage, for first-time buyers and homeowners looking to refinance, allows you to buy a home for as little as 3% down. There are no income limits or geographic limits on where you can buy a property, which can be a single family residence, a condo, or a townhouse. But you’ll pay mortgage insurance if your LTV ratio is over 95%. And no cash refinancing is allowed.
To be eligible: At least one borrower must be a first-time buyer if it is a purchase credit; the house must be a main residence with one unit; at least 3% down is required; if all borrowers are first-time buyers, at least one borrower must complete a training program for home buyers; all borrowers must occupy the home as their primary residence; and you are not allowed to have owned a property in the three years prior to your loan application.
Experts say HomeOne mortgage interest rates are generally lower than traditional mortgage rates. But keep in mind that the rate you are offered will depend on many factors including your credit score, work history, etc.
Freddie Mac does not provide loans directly to borrowers. Rather, he buys pooled mortgages from banks and other lenders who offer mortgages to borrowers. Freddie Mac offers the HomeOne Loan Program through participating banks, mortgage lenders, mortgage brokers and credit unions. Loans that meet Freddie Mac’s standards are classified as conforming loans.
The maximum debt-to-income ratio (DTI) allowed for the HomeOne loan is 45%. This means that all of your monthly debt payments, including your mortgage, cannot exceed 45% of your pre-tax income.
While there is no set minimum credit score to qualify for a HomeOne loan, most lenders require a score of 620 or higher.
At least one borrower must be a first time home buyer if this loan is for the purchase of a home. Additionally, if all borrowers are first-time home buyers, at least one borrower must complete a homeownership education program.
Yes, refinancing is allowed under the HomeOne Mortgage, although cash refinances are not allowed.
The maximum loan-to-value ratio (LTV) for a HomeOne mortgage is 97%, which means you’ll need to put in at least 3% less. However, if you use Affordable Seconds financing for your down payment and closing costs, your LTV can reach 105%.
Yes, you can use down payment assistance, like a gift, grant, or an affordable loan in seconds, for a HomeOne loan.
Check your new rate (December 5, 2021)