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Freddie Mac’s HomeOne Mortgage: What to Know

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Saving up for a down payment can be a major obstacle, keeping aspiring homeowners from buying a house. That’s why so many lenders have special programs designed to help first-time buyers make it over that hurdle.

Freddie Mac has designed a mortgage product specifically to help people buying their first home grab hold of the property ownership ladder. Called the HomeOneSM  mortgage, its biggest selling point is a 3% down payment on a one-unit house — like a single-family home, condo or town home.

Is HomeOne the right mortgage to help you buy your first home? We explain the pros and the cons of this loan, and compare it with other first-time buyer loans.

What is the HomeOne mortgage?

The HomeOne is a special product from Freddie Mac, one of two government-sponsored enterprises in the mortgage industry (the other is Fannie Mae). They are private, for-profit companies chartered by the U.S. government and designed to keep money flowing through the mortgage market.

Although Freddie Mac designed HomeOne, you cannot take out this mortgage directly through the company. Instead, you’ll work with a lender like a bank or a credit union to apply for a HomeOne mortgage.

HomeOne is a conventional mortgage, with a twist. Unlike many conventional mortgages, HomeOne requires just a 3% down payment. Borrowers also must live in the house following the home purchase, and first-time borrowers must take a homeownership education course. All HomeOne mortgages have fixed interest rates.

People with mortgages already owned by Freddie Mac may use HomeOne to refinance their existing loan. When you use a HomeOne mortgage to refinance, you cannot take cash out.

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HomeOne mortgage requirements

Although HomeOne is a conventional mortgage, it doesn’t follow all the rules of conventional underwriting. Borrowers must live in the house they buy. Freddie Mac also limits the loan to $453,100 — significantly less than loan limits for most other mortgage products.

Here are some important details about the HomeOne mortgage at a glance.

HomeOne Mortgage Requirements at a Glance
First-time buyer requirement Yes. At least one borrower must have had no ownership interest in a home in the last 3 years.

If you’re seeking a refinance, Freddie Mac must own your loan.

Purchase or refinance HomeOne can be used for new home purchases or a traditional refinance. Cash-out refinances are not allowed.
Occupancy requirement You must live in the home as your primary residence.
Down payment 3%
Minimum credit score Technically, no minimum. However, most borrowers need a 620 to qualify. At least one buyer must have a traditional credit score.
Maximum debt-to-income ratio 45%
Loan limit $453,100. Loan limits do not vary by part of the country.
Allowed home types One-unit homes, including town homes and condominiums. Manufactured homes are not allowed.
Fixed or adjustable rate Fixed rate only.
Mortgage insurance Required until borrower has at least 20% equity in the home.

Where to find the HomeOne mortgage

Finding a lender that offers the HomeOne mortgage can be difficult. This loan was introduced in July 2018, and not every lender has adopted it.

Even lenders that offer this type of loan may not call it the HomeOne mortgage. You may be better off contacting a conventional mortgage lender and asking a loan officer if the lender offers it.

We have, however, found a few national lenders that offer these mortgages:

  • SunTrust
  • Caliber Home Loans
  • Freedom Mortgage
  • eLend

HomeOne mortgage pros

  • 3% down payment.
  • No upfront mortgage insurance. Upfront mortgage is a fee you pay when you take out a mortgage. Other loans for first-time homebuyers include these premiums — but the HomeOne does not.
  • Can drop mortgage insurance. HomeOne borrowers do have to pay private mortgage insurance premiums to protect the lender in case of default. But once you have 20% equity in the home, you can stop paying for mortgage insurance.
  • No income limits.
  • No location restrictions. The HomeOne mortgage is available across the United States.

HomeOne mortgage cons

  • Only one-unit homes. Buyers can only use the HomeOne mortgage to buy single unit homes, including town houses and condos. People considering multiunit properties cannot use this mortgage.
  • No manufactured homes allowed.
  • Only fixed-rate mortgages.
  • First-time buyer restriction. At least one borrower must have not owned a residential property in the last three years.
  • Lower loan limit. The loan limit for HomeOne mortgages is $453,100, even in high cost of living areas.

How does the HomeOne mortgage compare with other loans for first-time buyers?

Although the HomeOne mortgage is specifically designed for first-time buyers, it’s not the only option on the market. Here’s how the HomeOne stacks up against other mortgages that first-time buyers might consider.

FHA mortgage

FHA mortgages allow borrowers with credit scores as low as 580 to buy a home with only a 3.5% down payment.

However, FHA mortgage holders must pay upfront mortgage insurance and maintain mortgage insurance through the life of the loan. HomeOne mortgage customers can stop paying mortgage insurance after reaching 20% equity in the home.

Here’s how the two loans compare.

HomeOne vs FHA mortgage
FHA HomeOne Mortgage
First-time buyer required No Yes
Geographic restrictions No No
Income Limits None None
Minimum credit score 580 (for 3.5% down) 620
Fixed or adjustable rate Both Fixed rate only
Occupancy requirement Yes Yes
Down payment 3.5% 3%
Maximum number of units 4 1
Education requirement No Yes
Loan limit Loan limits vary by county, but range from $294,515 up to $679,650 in the continental U.S. for single-family homes. You can look up limits in your area here. $453,100
Maximum debt-to-income ratio Generally 43% 45%
Upfront mortgage insurance Yes, 1.75% of loan value No
Ongoing mortgage insurance Yes Must only pay mortgage insurance until you have 20% equity.

VA mortgage

The VA mortgage is a benefit for active-duty military members and honorably discharged service members. It requires 0% down. When you use the loan for the first time, you’ll pay a maximum 2.4% funding fee. The fee decreases as the down payment gets larger.

By contrast, HomeOne borrowers won’t pay an upfront fee like this, but they will have to pay for private mortgage insurance until they have 20% equity in the house.

Like the HomeOne mortgage, the VA loan has a residency requirement. However, the VA mortgage allows for larger mortgage balances in certain parts of the country, greater loan variety and up to four units.

HomeOne vs VA mortgage
VA HomeOne Mortgage
First-time buyer required No Yes
Military service requirement Yes No
Minimum credit score Set by lender 620
Fixed or adjustable rate Both Fixed rate only
Occupancy requirement Yes Yes
Down payment 0% 3%
Maximum number of units 4 1
Education Requirement No Yes
Loan limit Loan limits vary by county. They range from $453,100 to $679,650 in the continental U.S. $453,100
Maximum Debt-to-income ratio Generally 41% 45%
Upfront funding fee Yes. Up to 2.4% for first time use. No
Ongoing mortgage insurance No Must pay mortgage insurance until you have 20% equity.

Fannie Mae HomeReady mortgage

The HomeReady mortgage by Fannie Mae is another 3% down conventional mortgage. This mortgage is similar to the HomeOne mortgage but has several important differences. For example, the HomeReady mortgage is restricted to borrowers who earn at or below the median income in their area. It also generally requires lower private mortgage insurance costs than most conventional mortgages. Here’s how the two loans compare.

HomeOne vs Fannie Mae HomeReady mortgage
HomeReady Mortgage HomeOne Mortgage
First-time buyer required No Yes
Income requirement Yes. Borrowers must earn less than the median income in their area. Borrowers buying in low-income census tracts also qualify. No
Minimum credit score 620 620
Occupancy requirement Yes Yes
Down payment 3% 3%
Fixed or adjustable rate Both Fixed rate only
Maximum number of units 4 1
Education Requirement Yes Yes
Loan limit Loan limits vary by county. Limits for single-family homes range from $453,100 to $679,650 in the continental U.S. $453,100
Maximum Debt-to-income ratio 45% 45%
Upfront mortgage insurance No No
Ongoing mortgage insurance requirement Must pay mortgage insurance until you have 20% equity. Must pay mortgage insurance until you have 20% equity.

Freddie Mac Home Possible mortgage

Freddie Mac’s Home Possible mortgage is a 3% down conventional mortgage designed for low- to moderate-income borrowers. First-time borrowers who qualify may want to consider the Home Possible mortgage if they want to buy a higher-priced home or a multifamily property.

HomeOne vs Freddie Mac Home Possible mortgage
Home Possible Mortgage HomeOne Mortgage
First-time buyer required No Yes
Income requirement Yes. Borrowers must earn less than the median income in their area. Borrowers buying in low-income census tracts also qualify. No
Minimum credit score 620 620
Occupancy requirement Yes Yes
Down payment 3% 3%
Fixed or adjustable rate Both Fixed rate only
Maximum number of units 4 1
Education Requirement Yes Yes
Loan limit Loan limits vary by county. Limits for single-family homes range from $453,100 to $679,650 in the continental U.S. $453,100
Maximum Debt-to-income ratio 45% 45%
Upfront mortgage insurance No No
Ongoing mortgage insurance requirement? Must pay mortgage insurance until you have 20% equity. Must pay mortgage insurance until you have 20% equity.

Fannie Mae Standard 97% LTV mortgage

The Fannie Mae Standard 97% LTV mortgage is virtually identical to Freddie Mac’s HomeOne mortgage. Both are 3% down loans for first-time buyers, and neither allows loans over $453,100. The primary difference is the credit score required.

HomeOne vs Fannie Mae Standard 97% LTV mortgage
Fannie Mae Standard 97% LTV mortgage HomeOneSM Mortgage
First-time buyer required Yes Yes
Minimum credit score 680 620
Occupancy requirement Yes Yes
Minimum down payment 3% 3%
Maximum number of units 1 1
Education Requirement No Yes
Loan limit $453,100 $453,100
Maximum Debt-to-income ratio 45% 45%
Upfront mortgage insurance No No
Ongoing mortgage insurance requirement? Must pay mortgage insurance costs until you have 20% equity. Must pay mortgage insurance until you have 20% equity.

Is a HomeOne mortgage right for you?

If you’re looking to take the first leap into homeownership but don’t have enough money for a large down payment, the HomeOne mortgage by Freddie Mac could be the right loan for you. This is particularly true if you do not have a military service history or earn a higher income than most families in your area.

Before you commit to the loan, compare it with all the other options for first-time buyers and get quotes from multiple lenders to be sure you’re getting the best interest rate possible.

 

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