HomeOne Loan Program

a couple standing in the middle of an empty houseAre you a first-time homebuyer looking for a suitable loan program to help you achieve your dream of homeownership? Look no further than the HomeOne Loan Program. In this blog post, we will discuss the key features and benefits of the HomeOne Loan Program, designed specifically for first-time homebuyers like you. Read on to learn more about this flexible and affordable loan option that can make owning your first home a reality.

Key Takeaways

  • A detailed guide is available that discusses the HomeOne Loan offered by Freddie Mac, which is aimed at assisting first-time homebuyers and those seeking to refinance their homes by providing a low-down-payment option and lenient requirements.
  • The HomeOne mortgage program allows buyers to put down as little as 3% on their home purchase without being restricted by income caps or property location. However, if the loan-to-value (LTV) ratio exceeds 95%, the borrower must pay for mortgage insurance and cannot perform cash-out refinancing.
  • To qualify for this mortgage option, applicants must meet specific criteria such as having at least one borrower who is a first-time homebuyer for purchase loans, the property must be a single-unit primary residence, a minimum of 3% down payment is required, and homebuyer education is necessary for all first-time purchasers. Additionally, none of the borrowers should have owned a property in the three years following the application.
  • Interest rates offered under the HomeOne program are generally more competitive than traditional mortgage rates. However, the actual rate a borrower receives will depend on personal financial factors like credit history and stable employment.
  • Freddie Mac operates by purchasing mortgages from financial institutions rather than offering loans directly to individuals. These institutions can include banks, mortgage companies, and credit unions. Loans that meet Freddie Mac's standards are referred to as conforming mortgages.
  • The debt-to-income ratio limit set for the HomeOne loan is 45%, which means your monthly debt payments, including the mortgage, should not surpass 45% of your gross income.
  • Most financial institutions expect a credit score of at least 620 for applicants, although there isn't an explicit minimum credit score mandated for HomeOne loans.
  • At least one participant in the loan must be purchasing a home for the first time, and if all parties on the loan are first-time buyers, then at least one must undergo a homeownership education course.
  • One can refinance their property with this mortgage option, but cash-out refinances are not viable under this program.
  • The maximum loan-to-value ratio for a HomeOne loan is 97%, necessitating at least a 3% down payment. Utilizing secondary financing options for down payments and closing costs can potentially increase the LTV ratio to 105%.
  • Borrowers can use various forms of down payment assistance when securing a HomeOne loan, including financial gifts, grants, or secondary financing such as Affordable Seconds loans.

Understanding the Homeone Mortgage Program

Obtaining a HomeOne mortgage involves a process akin to other initial homebuyer loans. Begin by applying through a lender that participates in the program.

While many lenders offer loan programs from Fannie Mae and Freddie Mac, please verify with your loan officer that they provide the HomeOne mortgage specifically.

Independent first-time homebuyers are required to complete an approved homebuyer education course. However, no-cost options are available, and this requirement is waived if a co-borrower has previously owned property.

Prepare to submit financial documents such as pay stubs, W-2 forms, and bank statements for income and asset verification. Your credit score will also be scrutinized to ensure it aligns with the HomeOne program's standards.

Another critical component of this mortgage is the compulsory mortgage insurance, which safeguards the lender if you default on payments. The amount of coverage you must acquire hinges on your loan-to-value (LTV) ratio, and you must choose from approved insurance providers.

Remember, only fixed-rate mortgage options are acceptable within this program; adjustable-rate mortgages (ARMs) do not qualify.

Requirements for a Homeone Loan

Getting approved for a home loan involves several criteria and documents that need to be in order. Here’s a comprehensive list of requirements you’ll likely encounter:

  1. Good Credit Score: Typically, lenders prefer a credit score of 620 or higher, though some may accept lower scores with additional conditions.
  2. Stable Income: Proof of steady income through pay stubs, W-2 forms, or tax returns for the past two years.
  3. Employment Verification: Verification of current employment status and stability in your job.
  4. Down Payment: Usually between 3% to 20% of the home’s purchase price, depending on the loan type.
  5. Debt-to-Income Ratio: Your total monthly debts, including the potential mortgage payment, should generally be less than 43% of your gross monthly income.
  6. Documentation: Personal identification (such as driver’s license or passport), Social Security number, and proof of residence.
  7. Property Appraisal: An appraisal to determine the market value of the property.
  8. Home Insurance: Proof of home insurance coverage for the property you intend to purchase.
  9. Reserves: Some lenders may require you to have cash reserves that can cover a certain number of months’ worth of mortgage payments.
  10. Additional Requirements: Depending on the lender and loan type, there may be additional requirements such as specific loan programs (like FHA or VA loans) which have their own criteria.
  11. Pre-Approval: While not mandatory, having pre-approval can strengthen your position when making an offer on a home.
  12. Closing Funds: Ensure you have funds available for closing costs, which can include fees for loan origination, appraisal, title insurance, and more.

By preparing these documents and meeting these requirements, you can streamline the home loan process and increase your chances of approval. Each lender may have variations in their requirements, so it’s always beneficial to check with them directly for specific details.

Advantages and Disadvantages 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:

  • 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.
  • 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.
  • 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.
  • 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.

Loan Limits for a HomeOne Loan

The HomeOne loan, offered by Freddie Mac, is designed to help low to moderate-income borrowers achieve homeownership with a reduced down payment requirement. As of 2024, the loan program allows borrowers to finance up to 97% of a home’s purchase price, which means a minimum down payment of just 3%. This makes homeownership more accessible for individuals who may not have substantial savings for a larger down payment.

The maximum loan amount for a HomeOne loan is subject to conforming loan limits set annually by the Federal Housing Finance Agency (FHFA). These limits vary by location and are based on the median home prices in each area, ensuring that borrowers can apply for financing that aligns with local housing market conditions.

Buyers who are tight on cash can buy single-unit homes that fit within conforming loan limits, which are up to $726,200 in most areas of the country. In high-cost regions across the United States, purchasers looking at pricier homes may qualify for loans as large as $1,089,300, the highest high-cost conforming limit set for 2024.

Credit Score Requirements

To be eligible for a Freddie Mac HomeOne loan, applicants are generally expected to have a credit score of 620 or above. It's important to note that individual lenders may set their credit thresholds, and in some cases, they might look for higher credit scores.

Applicants with credit scores above the typical 620 minimum may increase their chances of approval and potentially secure more attractive terms, like reduced interest rates. When considering a Freddie Mac HomeOne loan, it's wise to consult with various lenders as they each may enforce different credit score criteria.

Always stay updated on the latest lending standards by speaking with mortgage professionals. They can offer current advice on the Freddie Mac HomeOne loan program's credit score prerequisites, ensuring you receive personalized recommendations based on your financial profile and current market conditions.

Income Limits

The HomeOne loan program from Freddie Mac is not bound by strict income caps, aiming to facilitate home purchases for first-time buyers and individuals with moderate income levels. Eligibility for a HomeOne loan usually requires:

Status as a First-Time Homebuyer: This program is mainly open to those purchasing a home for the first time. To qualify as a first-time homebuyer, an individual should not have owned a property within the last three years. There can be exceptions to this rule, so potential borrowers should confirm with a mortgage lender to understand the exact requirements.

Conclusion: HomeOne Loan Program

In conclusion, the HomeOne Loan Program offers a tailored solution for first-time homebuyers seeking an accessible pathway to homeownership. With its unique features and benefits, this program provides a flexible and affordable option for those looking to purchase their first home.

By exploring the advantages of the HomeOne Loan Program, you can gain a better understanding of how it can support your journey towards becoming a homeowner. Don't miss out on this opportunity to make your dream of owning a home a reality with the HomeOne Loan Program. Take the next step towards securing your future by considering this specialized loan option today.

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

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