Freddie Mac HomeOne® 2023: 3% Down, No Income Limits

Freddie Mac HomeOne® allows first-time buyers to access a 3% down conventional loan without income or geographic restrictions.

This program is a game changer for any first-time buyer who can’t access other programs because they make too much or aren’t buying in eligible neighborhoods.

Here’s your guide to HomeOne.

• Freddie Mac HomeOne Guidelines
• No income limits
• No geographic restrictions
• How to get a HomeOne loan
• Down payment and closing costs
• Homebuyer education
• Mortgage insurance
• HomeOne vs Home Possible
• HomeOne vs HomeReady
• HomeOne vs Conventional 97
• Alternatives to HomeOne
• Become a homeowner with HomeOne

Freddie Mac HomeOne guidelines

Down payment is the biggest barrier to homeownership for first-time buyers. Yet many low-down-payment programs aren’t available to those who make more than 80% of the area’s median income. 

In many areas, you can’t even qualify for a home with that income.

HomeOne makes a 3% down loan available to buyers of any income level, provided they:

• Are buying a primary residence
• Have not owned a home in the past three years
• Are financing a 1-unit property, condo, or PUD
• Have a credit score of 620+
• Meet debt-to-income requirements
• Take required homeownership education
• Have adequate funds or assistance for 3% down plus closing costs
• Have a loan amount equal to or less than $726,200

Welcome to the new world of homebuying.

Say goodbye to income limits

Freddie Mac HomeOne has no income limits, unlike other programs such as:

• USDA home loans (115% of area median income [AMI])
• Freddie Mac Home Possible (80% of AMI)
• Fannie Mae HomeReady (80% of AMI)

If you’re buying in an expensive area, income limits are, well, very limiting.

Someone buying in Denver, Colorado, could only afford a home of around $325,000 (math below) if they make 80% AMI. But Denver’s median home price is $575,000 according to Redfin.

HomeOne allows you to buy the average home in places like Denver if you have higher income.

Say goodbye to geographic restrictions

Many low-down-payment programs come with geographic restrictions. 

USDA loans are only available in areas outside major metros, for example. Conventional loans like HomeReady and Home Possible are available everywhere, but the neighborhood determines income limits, adding a lot of guesswork to the home search.

HomeOne completely removes any geographic question marks so you can search for a home with confidence.

So how do you get a HomeOne loan?

Getting a HomeOne loan is like applying for any mortgage, with one key difference. 

The lender you apply with must be approved to offer Freddie Mac loans. Freddie Mac is one of the two the government agencies (the other is Fannie Mae) that creates rules for conventional/conforming loans. 

When you apply, specifically ask if the lender is approved with Freddie and if they have experience with HomeOne.

If so, get a HomeOne pre-approval so you can start looking at homes. A pre-approval is a fully approved loan less the appraisal. In other words, when you find a home, you’re nearly done.

Go home shopping at your approved purchase price. Find the home, submit any additional documents. Take homeownership education. Then, close the loan. You’re a homeowner.

Sounds simple right? It can be, but let’s dive into some more details so you know everything about this program.

Down payment

HomeOne requires just 3% down. An easy way to think about it is $3,000 for every $100,000 borrowed. 

The down payment can come from obvious sources like a checking or savings account, or even liquidated cryptocurrency, investment or 401k funds. 

But few people know that none of the down payment needs to come from your own money. You can use the following to cover it.

• Gift funds from a family member
• Gift funds from non-family you received for a wedding or graduation
• Down payment assistance (DPA) from federal, state, or local housing agency
• DPA from a non-profit organization or employer

For instance, you’re buying a home for $500,000 with HomeOne. The down payment would be $15,000. But your city offers down payment assistance that can cover the whole thing. In this case, you may be eligible to have 100% of the purchase price covered by loans and grants.

Keep in mind that HomeOne doesn’t come with income limits, but many DPAs do.

Closing costs

Keep in mind that even if you have assistance for the down payment, you still have to come up with closing costs.

Luckily, HomeOne lets you borrow money for the down payment and closing costs up to 105% of the home’s price through its Affordable Seconds program.

This program lets you use down payment assistance from government or non-profits to cover down payment and closing costs, even if the assistance is a loan that you must pay back. An additional loan is called a “second mortgage,” hence the name.

Closing costs are typically around 2-5% of the home’s price and pay for things like title and escrow services, credit reports, the appraisal, and property taxes that you must pre-pay.

These items can run $7,000-$10,000 or more. Here’s an example.

Home price	$500,000
Down payment (3%)	$15,000
Closing costs	$10,000
Down payment assistance loan	$25,000
Cash out-of-pocket	$0
Total loans	$510,000
Total home loan-to-value (LTV) ratio	102%

HomeOne would allow the above scenario because it is below 105% total LTV.

Homebuyer education

Homebuyer education is required prior to drawing final loan documents. 

Education providers are easy to find, but it must be:

• A HUD-approved national or local counseling agency
• A mortgage insurance company
• A state housing agency
• A CDFI (community development financial institution)

Realtors, builders, and most other organizations involved in the transaction are not an eligible source of education.

There are free and low-cost courses available, and many can be done online. Expect to spend 4-8 hours completing your education.

Mortgage insurance

Private mortgage insurance (PMI) is required for HomeOne or any conventional loan with less than 20% down.

Mortgage insurance cost is based on 

• Credit score
• Down payment

So, if you can put 5% down instead of 3%, for instance, mortgage insurance will be less expensive.

Following are approximate monthly PMI costs per MGIC based on a 3% down payment and various credit scores and loan amounts.

Loan Amount	Monthly PMI: 740 Score	Monthly PMI: 700 Score	Monthly PMI: 660 Score
$200,000	$116.67	$165.00	$256.67
$300,000	$175.00	$247.50	$385.00
$400,000	$233.33	$330.00	$513.33
$550,000	$320.83	$453.75	$705.83
$700,000	$408.33	$577.50	$898.33

Conventional PMI gets pretty expensive with a lower credit score. Consider a 3.5%-down FHA loan if your credit score is below about 700.

You also have the option to reduce your mortgage insurance costs by taking a higher rate or paying more upfront in fees. For example, A buyer with a 740 credit score could pay an extra $4,000 upfront to lower their PMI by about $50 per month on a $400,000 mortgage. 

Have your lender run both “standard” and “custom” mortgage insurance options to see which is better for you.

You can cancel mortgage insurance when you reach 20% to 22% equity in the home.

Difference between Freddie Mac HomeOne and Home Possible – Matrix

Loan criteria	HomeOne	Home Possible
Income limits	None	80% of area median income
Previous homeownership	At least 1 borrower: No ownership in last 3 years	At least 1 borrower: No ownership in last 3 years
Homebuyer education	Required if all applicants are first-time buyers	Required if all applicants are first-time buyers
Mortgage rates	Standard	Risk-based pricing is capped to keep rates lower
Down payment	3%	3%
Loan type	Fixed rate only	Fixed and ARMs
Property type	1-unit house, condo or PUD	1-unit house or condo; 2-4 unit house with 5% down; manufactured homes with 5% down
Occupancy	All borrowers must reside in the home	At least one borrower must reside in the home; non-occupant co-borrowers allowed if 5% down
Maximum loan amount	$726,200 (no “conforming jumbo”)	$726,200 for 3% down; local “conforming jumbo” / High Balance limits with 5% down.
Credit score	620; at least 1 borrower must have usable credit score	620; borrowers with no credit are eligible with 5% down
Max debt-to-income ratio	45%	45%
Mortgage insurance	Standard, or reduced with higher rate/fee	Reduced

Difference between HomeOne and Fannie Mae HomeReady – Matrix

Loan criteria	HomeOne	HomeReady
Income limits	None	80% of area median income
First-time buyer	At least 1 borrower must have had no ownership in last 3 years	First-time and repeat buyers are eligible
Homebuyer education	Required if all applicants are first-time buyers	Required if all applicants are first-time buyers
Mortgage rates	Standard	Risk-based pricing is waived or reduced, lowering rates
Down payment	3%	3%
Loan type	Fixed rate only	Fixed rate and ARMs
Property type	1-unit house, condo or PUD	1-unit homes; 2-units with 15% down; 3-4 units with 25% down; 1-unit condos & manufactured homes
Occupancy	All borrowers must reside in the home	Non-occupant co-borrowers allowed with 5% down
Maximum loan amount	$726,200 (no “conforming jumbo”)	$726,200 for 3% down; local “conforming jumbo” / High Balance limits with 5% down.
Credit score	620; at least 1 borrower must have usable credit score	620
Max debt-to-income ratio	45%	45%
Mortgage insurance	Standard, or reduced with higher rate/fee	Reduced

Difference between HomeOne and Fannie Mae 97 – Matrix

Loan criteria	HomeOne	Fannie Mae 97
Income limits	None	None
First-time buyer	At least 1 borrower must have had no ownership in last 3 years	At least 1 borrower must have had no ownership in last 3 years
Homebuyer education	Required if all applicants are first-time buyers	Required if all applicants are first-time buyers
Mortgage rates	Standard risk-based pricing applies	Standard risk-based pricing applies
Down payment	3%	3%
Loan type	Fixed rate only	3% down Fixed rate; 5% down adjustable rate
Property type	1-unit house, condo, or PUD	1-unit house, condo, or PUD. Manufactured home allowed with 5% down.
Occupancy	All borrowers must reside in the home	Primary residence. Non-occupant co-borrowers allowed with 5% down.
Maximum loan amount	$726,200 (no “conforming jumbo” a.k.a. High Balance)	$726,200 for 3% down; local “conforming jumbo” / High Balance limits with 5% down.
Credit score	620	620
Max debt-to-income ratio	45%	45%
Mortgage insurance	Standard, or reduced with higher rate/fee	Standard, or reduced with higher rate/fee

HomeOne alternatives

Freddie Mac Home Possible: This is similar to HomeOne, but it is only available to those who make 80% or less of the area median income. It requires 3% down.

Fannie Mae HomeReady: HomeReady can be thought of as Fannie Mae’s version of Home Possible. You must make 80% of your area’s median income or less. It comes with income limits. One unique aspect of this loan is that you can use income a roommate pays you if they have been living with you for the last 12 months and plan to live with you in the new home. This is a 3% down loan.

Fannie Mae Conventional 97: The Conventional 97 can be thought of as Fannie Mae’s version of HomeOne. It has no income limits, yet has many of the flexibilities that first-time buyers need. As the name suggests, it requires 3% down.

FHA loan: FHA allows for lower credit scores. Mortgage insurance is often less expensive for those with lower credit. It also offers flexibility around debt-to-income ratios and employment history. There are no income limits and 3.5% down is required.

VA loan: Available only to those with past or present military service, the VA loan is a zero-down program with no monthly mortgage insurance. There are no income limits.

USDA loan: This loan comes with geographic restrictions, since it’s meant to encourage homeownership is less densely populated areas. It has income limits of 115% of area median income. It requires 0% down.

HomeOne FAQ

Is HomeOne right for you?

Fortunately for homebuyers, there are plenty of 3% down loan options for any income level.

HomeOne can help you buy a home even if you thought you weren’t eligible for a loan with less than 10-20% down.

Contact a lender today and see if you can use HomeOne to become a homeowner.