Complete Program Guide & Requirements of the Freddie Mac HomeOne Loan

One of the greatest hurdles faced by first-time home buyers is saving for a down payment. Fortunately, there are several low- and no-down payment loan options and one such program is the HomeOne loan by Freddie Mac.

With HomeOne, you can buy a house with just 3 percent down. Furthermore, it has less strict eligibility requirements compared to many other programs, which makes it an attractive option for first-time home buyers.

What’s the Freddie Mac HomeOne Loan?

Freddie Mac’s HomeOne mortgage was introduced in 2018 and is aimed at making financing more accessible to prospective home buyers and home buyers that want to refinance. Due to its lenient underwriting guidelines, it can be an excellent option for low-income or moderate-income borrowers.

The loan is primarily targeted towards first-time buyers that don’t have too much disposable income but would like to enter the market with a smaller down payment. Keep in mind that Freddie Mac isn’t a mortgage lender but rather a government-sponsored agency for helping middle- and lower-income Americans buy homes.

Freddie Mac Doesn’t Offer Loans Like HomeOne Directly to Buyers

Instead, it buys packaged mortgage loans from various financial institutions that provide house loans to borrowers. That means you can get a HomeOne loan from just about any lender that offers Freddie Mac programs. You will even have the chance to shop around for the lowest interest rate.

HomeOne Loan

About the HomeOne Loan

One of the key benefits of the HomeOne loan is that it allows you to purchase real estate with a down payment of as little as 3 percent. That’s a massive advantage over other conventional loan programs that may require a down payment of 5%, 10%, or even 20%.

The other major perk is that there’s no geographic limitations regarding where you are allowed to buy a home using the HomeOne loan. Furthermore, there aren’t any income limits attached to this financing option. What’s more:

– You can buy one-unit properties using the HomeOne loan

– Eligible property types include townhome, single-family home, or condominium

– The approval process is less stringent compared to that of other types of loans

– Rent received from a boarder or roommate can count for as much as 30 percent of the income used to qualify for the loan.

If you opt for the HomeOne mortgage loan, however, you will be required to pay private mortgage insurance if the loan-to-value (LTV) ratio is higher than 95 percent, according to Freddie Mac. That means PMI will be needed if you put below 5 percent down.

If you opt to refinance via the HomeOne loan program, you won’t be allowed to take cash out. The program has been made available by Freddie Mac through participating lenders such as credit unions, mortgage brokers, mortgage lenders, and banks. 

HomeOne Loan: Eligibility Requirements

You must meet the following criteria to qualify for the HomeOne mortgage loan:

– You must put down at least 3% of the purchase price

– The property has to be a one-unit primary residence (which may include a condo, townhome, or single-family home)

– If the loan is for a home purchase, at least one of the borrowers must be a first-time homebuyer

– The loan amount has to be within the conforming loan limits

– If all the borrowers are first-time homebuyers, at least one borrower is required to complete a home ownership education program prior to the note date of the mortgage

– All borrowers are required to occupy the mortgaged premises as a primary residence.

Keep in mind that the definition of “first-time home buyer” is not as strict as it might sound. Anybody can qualify as a first-time buyer as long as they have not owned a home in the past 3 years. So, even if you previously owned a home, but have been renting for the past few years, you may qualify for the next home purchase using the HomeOne program by Freddie Mac.

HomeOne Income Limits

The fact that there aren’t any income caps to qualify is perhaps one of the best features of the HomeOne mortgage loan by Freddie Mac. The maximum debt-to-income (DTI) ratio for a HomeOne loan is 45 percent, the maximum LTV is 97 percent, and the minimum credit score is typically 620.

HomeOne Vs. Home Possible

Freddie Mac also backs a different loan program known as Home Possible. Just as is the case with HomeOne, it also offers loans for as little as 3 percent down on single-family homes.

Home Possible, however, is only available to individuals making less than 80 percent of the average monthly income for the ZIP code that they will be buying in. Your DTI cannot exceed 43 to 45 percent and a minimum FICO credit score of 660 is usually required.

If you consider the requirements of both programs, it is clear that qualifying for a HomeOne loan is slightly easier than a Home Possible loan. 

Furthermore, with a Home Possible loan, you can qualify with the income of your parent or other individual that agrees to co-sign the loan with you. However, at least one occupying borrower is required to participate in a homeownership education program when buying a home for which all the occupying borrowers are first-time buyers.

What Are Alternatives to the HomeOne Loan

Not all applicants will qualify for the HomeOne mortgage loan. Even if you actually qualify, a different loan program could be better for your situation, that’s why you must always explore all the options available to you.

If you are looking for a mortgage whose down payment is low, there are several excellent alternatives to the HomeOne program, which include:

– FHA Loan: It requires 3.5 percent down, 620 minimum FICO credit score, and a 50 percent maximum DTI ratio in most cases.

– VA Home Loan: It requires 0 percent down, 580 to 660 minimum FICO credit score, 41 percent maximum DTI, must be a qualifying veteran, active-duty service member, or spouse of a veteran.

– USDA Loan: It requires 640 minimum FICO credit score, 41 percent maximum DTI, annual income cannot exceed 115 percent of the median income in your area, must buy in eligible rural areas.

– Conventional 97 loan (Offered by Fannie Mae and Freddie Mac): It requires 3 percent down, 620 to 660 minimum FICO credit score, 50 percent maximum DTI, 97 percent maximum LTV ratio.

– Fannie Mae Home Ready Loan: It requires 3 percent down, 620 to 680 minimum FICO credit score, 50 percent maximum DTI, 97 percent maximum LTV, annual income cannot exceed 100 percent of the area median income (AMI).

If you aren’t sure which loan is best for you, your loan officer will help you explore the options available to you and decide.

HomeOne Loan Frequently Asked Questions (FAQs)

What Is the HomeOne Loan?

The HomeOne loan by Freddie Max is geared towards first-time buyers and homeowners that want to refinance and allows you to buy a home for as little as 3% down. There aren’t any income limits or geographic limitations on where you can purchase the property and it can be a townhome, condo, or single-family residence. If your LTV ratio is greater than 95%, however, you will have to pay mortgage insurance. No cash-out refinances are allowed.

How Do I Qualify for the HomeOne Loan?

To be eligible: At least one of the borrowers should be a first-time buyer if it is a purchase loan; at least 3% down is required; the home must be a one-unit primary residence; if all borrowers are first-time buyers, at least one of them will have to complete a homebuyer education program; all borrowers are required to occupy the home as a primary residence; and you aren’t required to have owned property in the 3 years prior to your loan application.

What Are HomeOne Mortgage Rates?

According to experts, HomeOne interest rates are generally lower than rates for traditional mortgage loans. However, remember that the rate you are quoted depends on numerous factors, which include your employment history, credit score, etc.

How Do Freddie Mac Loans Work?

Freddie Mac doesn’t provide loans directly to borrowers. Instead, it purchases packaged mortgage loans from various financial institutions that offer mortgage loans to borrowers. The HomeOne loan program is offered through participating banks, credit unions, mortgage brokers, and mortgage lenders. Loans meeting Freddie Mac’s standards are classified as conforming loans.

What Is the Maximum DTI for a HomeOne Mortgage Loan?

The maximum debt-to-income (DTI) ratio allowed for the HomeOne loan is 45%. That means all your monthly debt payments, including the mortgage cannot exceed 45% of your income before tax.

What Is the Maximum LTV for a HomeOne Mortgage Loan?

The maximum loan-to-value (LTV) for a HomeOne mortgage is 97%, which means that you will have to put at least 3% down. If you use Affordable Seconds to finance your down payment and closing costs, however, the LTV can be as high as 105%.

Is There a Minimum Credit Score to Qualify for a HomeOne Loan?

While there isn’t a defined minimum credit score required to qualify for the HomeOne loan, the vast majority of lenders require a score of at least 620.

Must I Be a First-Time Homebuyer to Use HomeOne?

At least one of the borrowers must be a first-time homebuyer if the loan is for a home purchase. If all borrowers are first-time homebuyers, at least one of the borrowers will have to complete a homeownership education program.

Is It Possible to Refinance with a HomeOne Mortgage?

Yes, refinancing is permitted under the HomeOne mortgage, but cash-out refinancing isn’t allowed.