Home Possible Mortgage Loan Program
Freddie Mac is a name you may have heard thrown around if you have ever applied, or looked into applying, for a new mortgage loan, unless you have applied for a Home Possible Mortgage Program, or the Home One Mortgage Program. Like its counterpart Fannie Mae, Freddie Mac is one of the largest government sponsored entities (GSE) that purchases conventional mortgages from lenders, packages them, and sells them to investors in the secondary market.
Conventional mortgages have been around for decades and are mortgages that meet traditional credit and lending standards outlined by Freddie Mac or Fannie Mae. Freddie Mac offers a variety of mortgage financing solutions that borrowers can take advantage of, including Home Possible. Home Possible is Freddie Mac’s affordable lending product offering.
New Century Mortgage has been able to help borrowers use Home Possible to reduce the amount of money needed to put down on a new purchase. We have also been able to help borrowers obtain more favorable financing terms on mortgage refinance transactions.
Here is a brief overview of Freddie Mac, as well as how its Home Possible program may benefit you in your next purchase or mortgage refinance.
Freddie Mac: A Brief History
Unlike the much older Fannie Mae, Freddie Mac or the Federal Home Loan Mortgage Corporation (FHLMC) was created by Congress in 1970.1 The federal government intended for Freddie Mac to compete with Fannie Mae and drive more affordable lending solutions to communities nationwide.
Freddie Mac and Fannie Mae continue to be two of the largest aggregators of mortgages within the United States. Freddie Mac also provides liquidity to real estate and mortgage markets. They do this by purchasing mortgages and packaging them into financial instruments known as mortgage backed securities. These mortgage backed securities are then sold to investors in the secondary market.
In 2008, the financial crisis greatly impacted Freddie Mac. This caused credit markets to contract and shrinking liquidity resulting in major losses globally.2 Much like Fannie Mae, these two quasi-government entities are vital to the US economy. As a result, Freddie Mac was put under conservatorship under the authority of the Federal Housing and Finance Administration (FHFA), with the goal of reducing operational and credit risk.
Since this transition, mortgage and housing markets have been able to stabilize and recover over the last decade. Freddie Mac continues to be a large provider of mortgage solutions to consumers.
As consumer demand for flexible mortgage solutions has continued to intensify over the last few years, Freddie Mac has introduced its Home Possible offering in efforts to satiate mortgage markets.
Affordable Lending – Home Possible Mortgage Loan Program
Freddie Mac’s Home Possible program is essentially a flexible and affordable loan program for credit-worthy, low income borrowers looking to purchase a new home or refinance an existing mortgage loan.
Home Possible offers several flexibilities allowing more borrowers to qualify for financing. One feature includes allowing for non-occupying co-borrowers, co-borrowers not living in the home, to be included as part of the application for single unit dwellings. Similarly, borrowers are also permitted to have another financed property.
For purchases, the funds for your down payment can come from multiple sources. Home Possible allows you to use pooled family funds, as well as those from other down payment assistance programs. Personal gifts can also be used for Home Possible purchase and mortgage refinance transactions.
Home Possible also lowers the down payment requirement and competes with Fannie Mae’s HomeReady as well as FHA and other lending programs in terms of affordability. Since the program was created to help lower-to-moderate income borrowers, the purchase or refinance of manufactured homes may also be eligible (with some restrictions).
Other ways that borrowers can benefit are for loans that require private mortgage insurance. Home Possible allows for reduced mortgage insurance coverage, meaning a lower monthly premium that you have to pay. The mortgage insurance is also cancellable, provided certain thresholds and restrictions are met.
First time homebuyers can certainly benefit by using Home Possible. However, you do not need to be a first-time homebuyer to take advantage of this offering.
In conclusion, if you want to learn more about Freddie Mac’s Home Possible program? New Century Mortgage can answer all your Home Possible related questions.
Fannie Mae and Freddie Mac Conservatorship