Freddie Mac Home Possible program

Freddie Mac Home Possible® 2024: A Flexible, 3% Down Mortgage

The Freddie Mac Home Possible mortgage is the agency’s all-out effort to turn moderate-income renters into homeowners.

Benefits include:

  • Reduced mortgage rates
  • Reduced mortgage insurance
  • Alternative down payment sources
  • Ability to use sweat equity
  • Qualifying with roommate income
  • And more

Here’s what you need to do to get a Home Possible loan.

Check your Home Possible eligibility.

In this article:

Freddie Mac Home Possible quick guidelines

You must earn a moderate income

This program is open to those who make 80% or less of their area’s median income. See the 

Income Limits” section below.

3% down

As with most programs, your down payment can come from personal savings or an investment account. But it can also come from alternative sources such as gift funds, down payment assistance program, cash saved at home, and even sweat equity. More on sweat equity below.

You don’t have to be a first-time homebuyer

You can own one other property and still be eligible for Home Possible.

Homebuyer education required

If everyone on the loan is a first-time buyer, one applicant must take a 4-8 hour homebuyer education course. Many courses are available for free or a small fee, and can be done online.

You must plan to live in the property

The program can be used for a home you plan to live in full-time. No second homes or investment properties.

Single-family, 2-4 unit, condos, and manufactured homes are eligible

It will be easiest to purchase a 1-unit (single-family) home with the program. However, you can buy a duplex, tri-plex, or 4-plex, condo, or manufactured home with some additional requirements.

See if you’re eligible for Home Possible.

Benefits of Home Possible

Use roommate income to qualify

You can use a roommate’s income for up to 30% of qualifying income. The roommate must have been living with you for a year and plan to continue to live with you in the new property. This person can’t be your spouse or domestic partner.

Reduced mortgage rates

Conventional loan rate pricing is complicated, but without going into too much detail, Freddie Mac waives risk-based rate increases. For instance, someone with a 660 credit score and 3% down could receive a rate reduction of about 1%, reducing the monthly payment by about $200 on a $300,000 mortgage.

Reduced mortgage insurance

Freddie Mac also lowers the mortgage insurance burden for Home Possible buyers. The savings pencil out to about $57 per month on a $300,000 mortgage for a buyer with a 680 credit score.

Alternative down payment sources

Down payments can come from gifts from a relative, or even wedding and graduation gifts from non-relatives. You can also finance your down payment with an unsecured personal loan or down payment assistance second mortgage. You can also make improvements to the home prior to closing and count the value of the improvements toward the down payment, otherwise known as “sweat equity.” More on this below.

Non-occupant co-borrowers allowed

A parent, sibling, or another individual who does not plan to live with you can be on the loan to help you qualify. This works well if you don’t have enough income to be approved on your own. 

Home Possible income limits

To qualify for Home Possible, you must make 80% or less of your area median income. Since most people have no idea what that number is, Freddie Mac has created an income eligibility map tool. Simply enter an address or area you are looking to buy a home to find out the Home Possible income limit.

Keep in mind that the lender will use your qualifying income on the loan application. So even if you make a high income, but write off a lot of expenses, you may still be eligible. The best way to discover your eligibility income is to get a full pre-approval from a lender. 

Home Possible Income Limits Map Tool Animation

Freddie Mac Home Possible income limit tool

Using sweat equity for your down payment

Sweat equity is the value of renovations you do yourself. Home Possible allows you to use the actual value of materials purchased or labor completed before closing toward your down payment.

For example, you are buying a home worth $200,000 as-is. But you remodel the bathroom prior to closing, an improvement that would have cost $6,000 had you not done it yourself. The lender can apply the improvement value toward your down payment.

In this example, the bathroom remodel covers your entire 3% down payment minimum.

However, sweat equity can be difficult to use. Here are some things to be aware of.

The seller might not agree: Most sellers don’t want the buyer working on their home prior to closing. Injuries, bad workmanship, delays, and major damage are just some of the risks to the seller. You’ll have to convince them that you can do the job safely and effectively.

You’ll need a legal agreement: There’s always a risk of the seller backing out of the sale after you complete improvements, just to sell the home to someone else for more. A legal agreement drafted by a lawyer can reduce this risk.

Know the value of the repairs: The appraiser must estimate the value of improvements in the appraisal. Make sure you know how much the appraiser thinks the renovation is worth before committing to it. 

Start your Home Possible loan.

Home Possible vs HomeOne

Freddie Mac offers another 3% down program, HomeOne. Here are the differences between these two loans.

Loan criteriaHome PossibleHomeOne
Income limits80% of area median incomeNone
Previous homeownershipAt least 1 borrower: No ownership in last 3 yearsAt least 1 borrower: No ownership in last 3 years
Homebuyer educationRequired if all applicants are first-time buyersRequired if all applicants are first-time buyers
Mortgage ratesReducedStandard for incomes >100% of area median
Down payment3%3%
Loan typeFixed and ARMsFixed rate only
Property type1-unit house or condo; 2-4 unit house with 5% down; manufactured homes with 5% down1-unit house, condo or PUD
OccupancyAt least one borrower must reside in the home; non-occupant co-borrowers allowed if 5% downAll borrowers must reside in the home
Roommate incomeCan use to qualifyNot allowed
Maximum loan amount$766,550 for 3% down; local “conforming jumbo” / High Balance limits with 5% down.$766,550 (no “conforming jumbo”)
Credit score660; borrowers with no credit are eligible with 5% down620; at least 1 borrower must have usable credit score
Max debt-to-income ratio45%45%
Mortgage insuranceReducedStandard, or reduced with higher rate/fee

Home Possible vs HomeReady

Loan criteriaHome PossibleHomeReady
Income limits80% of area median income80% of area median income
First-time buyerAt least 1 borrower: No ownership in last 3 yearsFirst-time and repeat buyers are eligible
Homebuyer educationRequired if all applicants are first-time buyersRequired if all applicants are first-time buyers
Mortgage ratesReducedReduced
Down payment3%3%
Loan typeFixed and ARMsFixed rate and ARMs
Property type1-unit house or condo; 2-4 unit house with 5% down; manufactured homes with 5% down1-unit homes; 2-units with 15% down; 3-4 units with 25% down; 1-unit condos & manufactured homes
OccupancyAt least one borrower must reside in the home; non-occupant co-borrowers allowed if 5% downNon-occupant co-borrowers allowed with 5% down
Roommate incomeCan use to qualifyCan use to qualify
Maximum loan amount$766,550 for 3% down; local “conforming jumbo” / High Balance limits with 5% down.$766,550 for 3% down; local “conforming jumbo” / High Balance limits with 5% down.
Credit score660; borrowers with no credit are eligible with 5% down620
Max debt-to-income ratio45%45%
Mortgage insuranceReducedReduced

Home Possible vs Fannie Mae Conventional 97

Loan criteriaHome PossibleFannie Mae 97
Income limits80% of area median incomeNone
First-time buyerAt least 1 borrower: No ownership in last 3 yearsAt least 1 borrower must have had no ownership in last 3 years
Homebuyer educationRequired if all applicants are first-time buyersRequired if all applicants are first-time buyers
Mortgage ratesReducedStandard for incomes >100% of area median
Down payment3%3%
Loan typeFixed and ARMS3% down Fixed rate; 5% down adjustable rate
Property type1-unit house or condo; 2-4 unit house with 5% down; manufactured homes with 5% down1-unit house, condo, or PUD. Manufactured home allowed with 5% down.
OccupancyAt least one borrower must reside in the home; non-occupant co-borrowers allowed with 5% downPrimary residence. Non-occupant co-borrowers allowed with 5% down.
Maximum loan amount$766,550 for 3% down; local “conforming jumbo” / High Balance limits with 5% down.$766,550 for 3% down; local “conforming jumbo” / High Balance limits with 5% down.
Credit score660; borrowers with no credit are eligible with 5% down620
Max debt-to-income ratio45%45%
Mortgage insuranceReducedStandard, or reduced with higher rate/fee

Home Possible vs FHA vs USDA

Loan criteriaHome PossibleFHAUSDA
Income limits80% of area median incomeNone115% of area median income
First-time buyerNo ownership in last 3 yearsNot requiredNot required
Homebuyer educationRequired if all applicants are first-time buyersNot requiredNot required
Mortgage ratesReduced conventional ratesComparable to Home PossibleComparable to Home Possible
Down payment3%3.5%0%
Loan typeFixed and ARMsFixed and ARMsFixed only
Property type1-unit house or condo; 2-4 unit house with 5% down; manufactured homes with 5% down1-4 unit homes and manufactured homes1-unit homes only
OccupancyOwner-occupiedOwner-occupiedOwner-occupied
Roommate incomeAllowedNot allowedNot allowed
Maximum loan amount$766,550 in most areas$498,257 in most areasNo stated limits
Credit score660; borrowers with no credit are eligible with 5% down580580-640
Max debt-to-income ratio45%56.9%Determined by 
Mortgage insuranceAbout 0.75-1.25% of loan per year0.55% of loan per year0.35% of loan per year

The Home Possible process

Here’s how to buy a home with this program, start to finish.

  1. Examine your budget and make sure you’re ready to buy a home
  2. Ensure you have funds or alternative sources for 3% down, plus 2-5% in closing costs
  3. Request a pre-approval from a lender
  4. Hire a real estate agent
  5. Shop for a home based on your pre-approved amount
  6. Make an offer on a home
  7. Work with the seller to agree on a sweat equity arrangement, if applicable
  8. Submit your purchase agreement to your lender
  9. Complete sweat equity work, if applicable. Get a final inspection from the appraiser
  10. Sign final loan documents
  11. Move into your home

FAQ

Can you cancel Home Possible mortgage insurance?

Yes. You can cancel mortgage insurance on all Freddie Mac and Fannie Mae loans when you reach 20% to 22% equity, depending on your servicer.

Are Home Possible rates better than those offered with standard Freddie Mac programs?

Yes. Freddie Mac eliminated risk-based rate hikes for certain borrowers as of December 1, 2022. Home Possible buyers with incomes less than 80% of their area’s median, or any first-time buyer who makes less than 100% of their area’s median, will receive better rates than standard buyers.

Should I use Home Possible or a standard conventional 3% down loan?

Home Possible comes with additional flexibility versus a standard conventional loan. For example, you can use sweat equity toward your down payment, use roommate income to qualify, and receive discounted mortgage insurance. If your income is over 80% of the area’s median, though, you’ll have to use a standard 3% down conventional loan.

Should I use Home Possible or FHA?

Lower-credit applicants should consider FHA, since mortgage insurance will probably be less expensive. FHA has no income limits and requires only 3.5% down versus Home Possible’s 3%. Ask your lender to run both scenarios to see which one suits your situation better.

Do I apply with Freddie Mac for Home Possible loan?

No. Find a lender that is approved to offer Freddie Mac programs. Freddie Mac is a government-sponsored mortgage agency that creates lending guidelines. Private mortgage companies and banks use these guidelines to approve loans.

Start your Home Possible loan

If you’re ready to buy a home, this program could be the tool you need to complete this goal. 

Contact a lender, get pre-approved, and start looking for a home. 

See if you qualify for Home Possible. Start here.

Author

  • Tim Lucas

    Tim Lucas (NMLS 118763) has 20 years of hands-on mortgage industry experience helping everyone from first-time buyers to experienced investors. He purchased his first home at 26 with just $1,100 out-of-pocket and now owns real estate worth $2.4 million. Tim was the managing editor at national websites TheMortgageReports.com and MyMortgageInsider.com and has been featured in publications such as Time, U.S. News, MSN, and more. He is a licensed loan originator (NMLS 118763). Connect with Tim on LinkedIn, Twitter, and TikTok.