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HomeOne Mortgage Guide
Freddie Mac’s HomeOne Mortgage Program enables you to buy a home with a 3% down payment and no personal financial contribution. The HomeOne Program is similar to Freddie Mac’s Home Possible program but offers several key advantages for borrowers. First, unlike the Home Possible Program, the HomeOne Program does not apply borrower income limits. This means that all borrowers are eligible to apply for the program regardless of how much money you make. Additionally, the HomeOne Program does not limit where the property being financed is located and property location does not impact your mortgage rates. These features are designed to make the program accessible to more borrowers and easier to use.
Although Freddie Mac determines the guidelines for the HomeOne Program, you apply for the program through approved lenders such as banks, mortgage banks, mortgage brokers and credit unions. These approved lenders make sure that applicants meet program eligibility and qualification requirements. The table below shows rates and fees for leading lenders near your. Shop multiple lenders to determine if they offer HomeOne mortgage and other low down payment programs. Comparing multiple lenders also enables you to find the best mortgage terms.
In addition to not applying borrower income or property location limits, there are other differences between the HomeOne and Home Possible Programs. First, only single unit properties are eligible for the HomeOne Program whereas multi-family properties are eligible for the Home Possible Program. The HomeOne Program only permits fixed rate mortgages while Home Possible allows both fixed rate and adjustable rate mortgages (ARMs). At least one borrower for a HomeOne loan must be a first-time homebuyer as compared to Home Possible which is available to both repeat and first-time buyers. Finally, at least one applicant for the HomeOne Program is required to have a credit score while the Home Possible program is more flexible for borrowers with non-traditional credit profiles.
Borrowers must meet certain eligibility requirements to qualify for the program. We review the key HomeOne qualification requirements below.
Borrower Personal Financial Contribution
Borrowers can combine a HomeOne mortgage with a personal gift, employer program, down payment grant, closing cost assistance program or qualified subordinated second mortgage to pay for a down payment, closing costs or property renovations, allowing the borrower to purchase a property with no personal financial contribution. Down payment and closing cost assistance grants as well as qualified second mortgages, also referred to as Affordable Second mortgages, are typically provided through state or local housing agencies or commissions.
Maximum Loan-to-Value (LTV) Ratio
The maximum loan-to-value (LTV) ratio for the HomeOne Program is 97% but if the borrower uses an Affordable Second mortgage, the maximum LTV ratio is 105%. LTV ratio is the total amount of loans against a property divided by the market value of the property. An LTV ratio above 100% means that you can borrow more money than the property is worth, which can be helpful under certain circumstances such as if it is challenging to pay for closing costs or minor property renovations.
For example, if you want to buy a home priced at $100,000, you could potentially qualify for a HomeOne mortgage for $97,000 and an Affordable Second loan for $8,000. You can use the second loan to pay the $3,000 required down payment plus closing costs and minor repairs. In this case, the total amount of loans financed by the property is $105,000 which means your LTV ratio is 105% ($105,000 (loans on property) / $100,000 (property value) = 105% LTV).
As stated above, the maximum LTV ratio if you are not using an Affordable Second loan is 97%.
Credit Score
The HomeOne program typically requires a minimum borrower credit score of 660. Additionally, in the case of co-applicants, at least one borrower is required to have a credit score. Borrowers without credit scores are not eligible for the program as the use of non-traditional credit profiles is not permitted according to program guidelines. We recommend that you review your credit score six months to a year before you start the mortgage process to address potential issues.
Borrower Debt-to-Income Ratio
Although the program has no set figure, most lenders apply a debt-to-income ratio of 43% - 45% for program applicants. In short, a debt-to-income ratio represents the ratio of how much you spend on monthly debt payments such as your mortgage and credit card bills to your monthly gross income. The higher the debt-to-income ratio used by the lender, the larger the mortgage you can afford.
Borrower Income Limit
Unlike many other no or low down payment mortgage programs, the HomeOne Program does not apply a borrower income limit. All applicants are eligible for the program no matter how much money you earn.
First-Time Home Buyers
At least one applicant is required to be a first-time home buyer to qualify for the program. Please note that you may qualify as a first-time home buyer even if you previously owned a home as long as you have not owned at home for at least two years. Applicants should check with their lender to determine if they qualify as a first-time buyer.
Homebuyer Education Class
If both applicants are first-time home buyers, they are required to take a Freddie Mac-approved homeownership education class. If one of the applicants is a repeat home buyer, you may not be required to take the class, but it is probably a good idea anyway.
Borrower Financial Reserves
The HomeOne program does not require that borrowers hold reserves when their mortgage closes, although we recommend that you keep enough savings in reserve to cover three-to-six months of total monthly housing expense, including your mortgage payment, property tax and homeowners insurance, if possible.
Use our free personalized mortgage quote form to compare no obligation quotes from leading lenders. Our quote feature is easy-to-use, requires minimal personal information and does not affect your credit. Comparing multiple mortgages proposals is the best way to save money on your loan.
Mortgage Rate
The mortgage rate you pay on a HomeOne loan depends on several factors including your credit score and loan-to-value (LTV) ratio. Borrowers with a credit score of 720 and above receive the program’s best interest rate while borrowers with lower credit scores and higher LTV ratios pay higher interest rates.
For borrowers with good credit scores, the interest rate for a HomeOne loan is similar to other conventional no and low down payment programs but higher than the rate for government-backed programs such as the FHA, VA and USDA mortgage programs. Borrowers should compare quotes from multiple lenders to find the the best loan terms.
Private Mortgage Insurance (PMI)
The HomeOne Mortgage Program requires that borrowers purchase private mortgage insurance (PMI), which is an ongoing monthly cost in addition to your monthly mortgage payment. In short, PMI protects the lender in the event that the borrower defaults on the mortgage. The amount of PMI the borrower is required to pay depends on the LTV ratio and mortgage term, with the lower your LTV ratio, the lower the required PMI.
Most conventional low down payment programs require borrowers to pay PMI while the FHA and USDA Mortgage programs require the borrower to pay both an up-front and ongoing mortgage insurance premium (MIP). The HomeOne Program does not require borrowers to pay an upfront PMI fee and the monthly PMI fee is removed when your LTV ratio falls below 78%.
Extra Fees
Borrowers are required to pay standard lender fees and closing costs with a HomeOne Mortgage and are not required to pay additional fees to apply for the program. Borrowers using an Affordable Second loan, down payment grant or closing cost assistance program may be required to pay a separate fee to apply for that program.
Impound Account
Along with their mortgage payment, the HomeOne Program requires borrowers to pay property tax, homeowners insurance and PMI into an impound account on a monthly basis. An impound account is a trust account controlled by the lender from which expenses such as taxes and insurance are paid when due. The impound account does not affect the amount of fees the borrower is required to pay for the mortgage. Additionally, although your monthly payment is higher because you cannot pay your property tax or insurance separately, your total cost for these items is unchanged.
Use the FREEandCLEAR Lender Directory to search for twenty-five mortgage programs including many no or low down payment options.
Mortgage Program
Only fixed rate mortgage are allowed according to program guidelines. Adjustable rate mortgages (ARMs) and interest only mortgages are not allowed.
Loan Limit
The HomeOne program only applies to conforming loan amounts ($726,200 or below for a single unit property) which limits the size of mortgage you can obtain. Please note that super conforming mortgages (higher conforming loan limits for more expensive counties) are not allowed.
Mortgage Type
The HomeOne Program applies to home purchase mortgages as well as refinancings, as long as your existing loan is owned or securitized by Freddie Mac. You can contact Freddie Mac to determine if they own your mortgage. Cash-out refinancings are not allowed under the program.
The HomeOne Program only applies to owner occupied, single unit properties such as homes, condominiums, co-ops and units in a planned unit development (PUD). Manufactured homes, multi-family properties, rental properties as well as second and vacation homes are not eligible for the program.
Occupancy Requirement
All borrowers must live in the property they are buying as their primary residence.
Related FREEandCLEAR Resources
Sources:
"HomeOne." Origination & Underwriting. Freddie Mac, 2020. Web.
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