HomeOne Loan in PA

a couple standing in the middle of an empty houseIf you are a first-time homebuyer, you may be overwhelmed with loan options and requirements. Luckily, the Freddie Mac HomeOne mortgage can be attractive for those with high incomes but low savings. This program allows eligible homebuyers to purchase properties with only a 3% down payment, regardless of income or buying location. 

To qualify for a HomeOne mortgage, there are some eligibility requirements you need to meet. It would be best if you were a first-time homebuyer or not have owned a home in the past three years. Income limits or geographic restrictions may apply, so you must check with your lender to see if you qualify. 

Like any mortgage program, it's crucial to understand the pros and cons of the HomeOne mortgage. One of the main benefits is the low down payment requirement, which can make it easier for first-time homebuyers to get into the market. However, you may have difficulty qualifying for this program if you have a low credit score or a history of mortgage fraud. Additionally, you must purchase title insurance to protect your property and ensure the home's title is clear. 

Overall, the HomeOne mortgage is a popular program offered by Fannie Mae and can be an excellent option for those who meet the eligibility requirements. It's essential to do your research and work with a trusted lender to determine if this program is right for you. And remember to be aware of all the costs and requirements associated with homeownership, as owning the property must be a long-term financial commitment.

What is the Freddie Mac HomeOne mortgage?

The Freddie Mac HomeOne mortgage is a low-down-payment program for first-time homebuyers with guidelines set by the Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac. This program allows eligible buyers to purchase homes with only a 3% down payment, regardless of income or buying location. The HomeOne mortgage can also refinance a home, provided no cash is taken out. However, the refinanced loan must be a Freddie Mac-serviced loan, which can be verified using the Freddie Mac Loan Look-Up Tool.

How the Homeone Mortgage Works

Getting a HomeOne mortgage is similar to getting any other first-time homebuyer loan. First, you must apply with a lender that offers the program. While most lenders offer Fannie Mae and Freddie Mac loan programs, you should check with your loan officer if you're specifically applying for the HomeOne mortgage. If first-time homebuyers purchase independently, they must take an approved homebuyer education course. There are free options, and you can skip the course if at least one co-borrower has owned a home before.

You'll need to provide income, asset, and credit documentation. Lenders will review your pay stubs, W-2s, and bank statements and must verify a valid credit score that meets the program requirements. You'll also need to pay mortgage insurance, which covers lender losses if you can't make payments and go into mortgage default. You'll have to purchase a minimum coverage based on your loan's LTV and use an approved insurer. It's important to note that only fixed-rate mortgages are permitted; adjustable-rate mortgages (ARMs) aren't allowed.

Homeone Eligibility Requirements

Although the HomeOne program allows higher-income earners to qualify, some added restrictions come with that flexibility. To qualify for the HomeOne program, at least one borrower must have had no ownership in a residential property in the last three years. All borrowers must live in the home as their primary residence, and eligible properties include one-unit homes, planned unit developments, and condominiums. The down payment is 3%, and at least one borrower must have a usable credit score. The total monthly debt compared to verified gross income can't exceed 45%, and homeownership education is required if all borrowers are first-time homebuyers.

Homeone Income Limits

The Freddie Mac HomeOne program doesn't set any income limits, making it an attractive option for borrowers with a 3% down payment but earning more than the median income requirements set for the Fannie Mae HomeReady or Freddie Mac Home Possible programs.

Pros and Cons of a HomeOne Mortgage

Pros of a HomeOne Mortgage:

  1. No income limits or location restrictions: HomeOne mortgage is available to borrowers without any income limits or location restrictions, making it accessible to a broader range of people.

  2. Low down payment: HomeOne mortgage only requires a 3% down payment, which is lower than the typical 20% down payment required for most conventional loans. This can help make homeownership more affordable for many borrowers.

  3. Flexible credit requirements: HomeOne mortgage has flexible credit requirements, making it easier for borrowers with lower credit scores or limited credit history to qualify for a loan.

  4. Fixed-rate option: HomeOne mortgage offers a fixed-rate option, which means that the interest rate and monthly payments will remain the same throughout the life of the loan, providing borrowers with stability and predictability.

Cons of a HomeOne Mortgage:

  1. Private mortgage insurance (PMI): Borrowers with a HomeOne mortgage will have to pay for private mortgage insurance (PMI) if they put down less than 20% of the purchase price, which can add to the overall cost of the loan.

  2. Higher interest rates: HomeOne mortgage interest rates may be higher than other conventional loan options, which could result in higher monthly payments over the life of the loan.

  3. Limited eligibility: HomeOne mortgage is only available to first-time homebuyers or those who haven't owned a home in the past three years, which may limit eligibility for some borrowers.

  4. Property restrictions: HomeOne mortgage may have restrictions on the type of property that can be financed, such as a limit on the number of units in a multi-unit property. This may limit the options for some borrowers purchasing a specific property type.

Comparison of HomeOne and Home Possible Programs

The Freddie Mac HomeOne program is similar to the Home Possible program in that both allow buyers to purchase a home with as little as 3% down. However, potential homebuyers should know a few differences between the two programs.

Criteria HomeOne Program Home Possible Program
Down Payment 3% minimum 3% minimum
Eligibility First-time homebuyers or those who haven't owned a home in the past three years No first-time homebuyer requirement
Income Limits No income limits to the total income of all borrowers and cannot be more than 80% of the median income in the region.
Mortgage Insurance Borrowers are required to pay for mortgage insurance if they put down less than 20% Borrowers are required to pay for mortgage insurance if they put down less than 20%
Property Types Single-family homes, townhomes, and condos Single-family homes, townhomes, and condos
Maximum Loan Amount $726,200 in most areas $726,200 and $1,089,300
Credit Score Requirements A minimum credit score of 620 A minimum credit score of 660

The comparison table shows that the HomeOne and Home Possible programs share many similarities, such as the minimum down payment and the types of eligible properties. However, there are also some key differences to note.

One of the main differences is the eligibility criteria. While the HomeOne program is only available to first-time homebuyers or those who haven't owned a home in the past three years, the Home Possible program has no such requirement.

Another difference is the income limits. There are no income limits for borrowers. On the other hand, the Home Possible program has standard income limits that apply to all properties.

Finally, credit score requirements differ between the two programs. HomeOne requires a minimum credit score of 620, while Home Possible requires a minimum credit score of 660.

Income Limits

One of the main differences is that Home Possible has income limits, while HomeOne does not. Home Possible is designed to help lower-income buyers purchase a home, while HomeOne is aimed at high-income buyers who may not have saved enough for a down payment.

The maximum loan amount for Freddie Mac's HomeOne mortgage program is $726,200 in most parts of the country┬╣. However, buyers purchasing expensive homes in high-cost areas of the U.S. may be eligible for loan amounts as high as $1,089,300, the maximum high-cost conforming limit in 2023.

I hope this helps! Let me know if you have any other questions.

Credit Score Requirements

Another difference is that Home Possible allows for non-traditional credit, meaning buyers without a credit score can still qualify for a loan. HomeOne requires at least one borrower to have a usable credit score.

Alternatives to HomeOne

If you don't qualify for a Freddie Mac HomeOne mortgage, other low-down-payment options are available, such as Fannie Mae HomeReady, FHA, VA, and USDA loans.

HomeReady

Fannie Mae HomeReady is designed for low- to moderate-income borrowers with limited savings for a down payment. HomeReady has income limits, but they're higher than those of the Home Possible program.

FHA Loans

FHA loans enable purchasers to put up as little as 3.5% on the house. Low credit score consumers may apply for FHA loans, but they come with mortgage insurance costs that might raise your monthly payment.

VA Loans

No down payment and no minimum credit score are necessary for VA loans. They do, however, come with a financing charge that might increase the price of your loan by thousands of dollars.

USDA Loans

USDA loans feature low-interest rates and need no down payment, however, they are only offered in limited locations and have income restrictions.

Conclusion

The Freddie Mac HomeOne mortgage is an excellent option for high-income buyers who don't have a large down payment saved. With only a 3% down payment required and no income limits, it can help you get into a home faster than you might have thought possible. However, other low-down-payment options might work for you if you don't qualify for the HomeOne program.

SOURCE:
HomeOne® - Freddie Mac Single-Family. https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/home-one.

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