The loan program requires 3% purchase down payment or 3% equity for refinancings. The program enables a borrower to possibly reduce their interest rate while at the same time reducing their expensive monthly mortgage insurance.
The program can be used to buy a single- unit property or for a no-cash-out refinance of an existing mortgage. Mortgages are available at 15-,20-, and 30-year terms with fixed interest rates.
Lenders began offering Fannie Mae’s 97% loan-to-value (LTV) product in December
. Mortgages under the Fannie program must meet the GSE’s usual eligibility requirements, including underwriting, income documentation and risk management standards and will require private mortgage insurance or other risk sharing.
In October, the government-sponsored entities announced their 3% down payment products
for home buyers. The move was in an effort to expand mortgage credit, while giving lenders additional protection.
For Freddie Mac’s program, borrowers do not have to be first-time home buyers. The GSE enables those who are purchasing to use 100% gift funds for their down payment, closing costs and escrow impounds. It is not required to have any sort of payment reserves.
"Home Possible Advantage gives qualified borrowers with limited down payment savings a responsible path to homeownership and lenders a new tool for reaching eligible working families ready to own a home of their own. Home Possible Advantage is Freddie Mac's newest effort to foster a strong and stable mortgage market,” Dave Lowman, executive vice president of Single-Family Business at Freddie Mac, said.
Freddie Mac encourages mortgage professional
to inform borrowers that they qualify based on a case-by-case basis and encourage them to not assume whether or not they can qualify or not. For example, if a borrower has a lower credit score but strengths such as an excellent job history, they may be able to qualify.
First-time homebuyers are required to complete homeownership education to purchase a Home Possible Mortgage. Borrowers are shown a curriculum specified by the National Standards for Homeownership Education and Counseling to ensure they are aware of all the ins and outs of buying a home.
Beginning Monday, Freddie Mac will begin offering its new 3% down mortgage program -- Home Possible Advantage.