Freddie Mac and Home Possible Mortgages

Freddie Mac and Home Possible Mortgages

The US has not made a wholesale push to get more cash and income-strapped households owning a house for a while. Three years to be exact. Nationalized housing agency Freddie Mac and Home Possible Mortgages are the new way to buy a house for low and medium income families.

Even with the modest requirements, most Americans who needed access found themselves excluded from the mortgage program Freddie Mac introduced in 2015. The programs designed for qualified low-and moderate-income borrowers has grown.  Qua1lified is the key word. It just wasn’t growing fast enough. While putting 3 percent down payment may not have been especially challenging for most Americans, having even the modest income required to go along with it, was.

Freddie Mac and Home Possible Mortgages

So according to Zero Hedge, last week, Freddie Mac has new 3 percent down plan announced on Thursday. A twist from the recent past to supercharge its 3 percent down payment program. It launched a widespread expansion of the offering. It announced that it is rolling out a new conventional 3 percent down payment option for qualified first-time homebuyers. Effectively, it was the same as the 2015 program with one small difference: there would be no geographic restrictions; more importantly, there are no longer any income restrictions.

Assuming I understand the program correctly, with Freddie Mac and Home Possible Mortgages, first-time buyers need ONLY the 3% down payment to buy a house. That means no income!

Motley Fool states, “The Fannie Mae HomeReady 3%-down option is available in certain low-income areas and has no first-time buyer restrictions. The process of obtaining a HomeReady loan is a bit more rigorous.  There is a requirement to attend a pre-purchase homeownership course. However, the HomeReady offers certain features designed to make homeownership more accessible to lower-income buyers, such as the ability to use a non-occupant co-borrower’s income for qualification purposes.

They are calling the Freddie Mac version of the 3%-down mortgage Home Possible Advantage. It has similar characteristics to the Fannie Mae program. A variety of banks offer these loan programs.  Some partner with Fannie Mae and some with Freddie Mac. Banks often have their own names for these loans, such as Wells Fargo‘s “yourFirstMortgage” product.

With all of these programs, it’s important to point private mortgage insurance, or PMI is a requirement.  Once you hit the loan-to-value ratio 80%, the rrequirement falls away.

Yes, Freddie Mac and Home Possible Mortgages are new.

There even is a safeguard in place, I say with tongue in cheek.  When all the borrowers are first-time homebuyers, at least one borrower must participate in homeownership education in order to qualify.

The New York Times said in February 2015, “But it is important to know that the low-down payment options now available are not synonymous with the subprime loans that proliferated during the housing bubble, which often required little more than a pulse to qualify. Without these new programs, the population would find themselves locked out from the forced savings plan that is homeownership.”

Call me bowled over. It now looks like sub-primes are back, and all you need is a pulse. Please chant with me: The insanity is back.

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Christian Dunlap

I am a family man with four kids and one heck of a beautiful wife. For work, I'm one of those, "We buy houses" guys, which basically means I buy houses for cash through out Hampton Roads, fix them up and then resell them. It's a very rewarding career that affords me to the opportunity to meet and help out people from every walk of life.