HomeOne Loan: Your Path to Low Down Payment Home Buying

Buying a home is a major goal for many people. Saving for a large down payment can be hard. A HomeOne loan from Freddie Mac helps buyers get into a home sooner. This mortgage program requires a very low down payment. It makes homeownership possible for more families. This guide explains how the HomeOne mortgage works.

What Is the Freddie Mac HomeOne Loan Program?

Freddie Mac is a government-sponsored enterprise. It buys mortgages from lenders. This helps keep money available for home loans. The Freddie Mac HomeOne product is a specific loan program. It started in 2018. Freddie Mac designed it to help people purchase their first home. It offers a fixed-rate mortgage. The main feature is the 3% down payment option.

This is a conventional loan. It is not an FHA or USDA loan. Because it is conventional, it has different rules. It does not require upfront funding fees like some government loans. The HomeOne program focuses on borrowers with low- to moderate-income. It also has flexible rules to qualify.

The HomeOne mortgage allows a down payment as low as 3%.
It is designed for those new to homeownership or who have not held a title recently.
The property must be your primary residence. You cannot use it for a vacation home or investment.
There are income limits based on the homeowner's location.
You can use it to buy a single-family home, townhouse, or condo.

Eligibility Requirements: Who Can Apply?

To qualify for a HomeOne loan, you must meet specific rules. These rules protect both the borrower and the lender. First, at least one person on the loan must be a first-time homebuyer. The rules state that at least one borrower must be a first-time homebuyer. This means you cannot have held title to a home in the last 3 years.

You must live in the home. This is called owner-occupancy. You cannot buy the property just to rent it out. Your credit score matters. Most lenders look for a score of at least 620. You also need a steady job and income. The lender will check your debt-to-income ratio. This compares your monthly debts to your income. It helps the lender see if you can afford the monthly payments.

Income Limits and Location

The income limits change by area. The limit is higher in cities with high home prices. It is based on the area median income. Your total household income must be at or below the limit. This ensures the program helps those who need it most. You can ask your mortgage officer about the limits in your area.

First-time buyer status is a key part of the rules. If you are purchasing with someone else, only one of you needs to meet that status. The other person can have previously held a mortgage. This is helpful for married couples. If you have owned a home in the past, you might still qualify. But you cannot have had one in the last three years.

Down Payment and Mortgage Insurance

The low down payment is a big draw of this product. You only need 3% down. On a $200,000 house, that is $6,000. This is much less than the standard 20% down. Because the down payment is small, the loan-to-value ratio is high. This means you borrow a large share of the home's value.

With a high loan-to-value ratio, mortgage insurance is required. This insurance protects the lender if you stop paying. It is not the same as home insurance. Mortgage insurance is a monthly cost. It is added to your payment. For a conventional loan, this is called private mortgage insurance (PMI). Once you have paid down your loan to 80% of the home's value, you can request cancellation of PMI.

You can also use gifts for the down payment. The money does not have to come from your savings. A family member can give you the funds. This is another way the program helps buyers. You can also use grants for down payment help. Some state and local programs offer this. Check if you qualify for secondary financing or assistance programs.

Down Payment: Only 3% is needed. You can use gift funds or grants.
Mortgage Insurance: Required due to a low down payment. You can cancel it later.
Credit Score: Usually need a score of 620 or higher, though lender requirements vary.
Property Type: Must be a primary residence. Condos and single-family homes are allowed.
First-Time Buyer Rule: At least one borrower must be a first-time homebuyer.

HomeOne vs. Other Loan Options

It helps to compare the Freddie Mac HomeOne to other programs. FHA loans are popular for first-time buyers. They allow a 3.5% down payment. But they have mortgage insurance for the life of the loan. You often cannot cancel it. The HomeOne mortgage lets you cancel PMI. This can save you money over time.

Another Freddie Mac product is Home Possible. It is very similar to HomeOne. Home Possible also has low down payments. It also has income limits. A key difference is that Home Possible allows secondary financing more easily. This means you can use a second loan to help with the down payment. HomeOne focuses on being simple and straightforward. It does not allow as much secondary financing.

FHA loans have different property rules. They have their own requirements to qualify. USDA loans are for rural areas. They have 0% down but strict location rules. The HomeOne program is a good fit for buyers in many areas. It works for those with good credit who want a conventional loan.

Using the HomeOne Mortgage for Refinance

Can you use this product to refinance? Yes, the HomeOne mortgage can be used for a refinance. This is called a rate-and-term refinance. You might want to lower your interest rate. Or you might want to change your loan term. For example, you could switch from a 30-year loan to a 15-year loan. This can help you build equity faster.

The refinance option has rules. You must currently live in the home. The home must be your primary residence. There are also cash limits back. You cannot withdraw cash from your home equity with this program. It is for lowering payments or changing terms. If you need cash, you would need a different loan program. Talk to your lender about your goals. They can tell you if the HomeOne program is right for your refinance needs.

Costs and Fees to Consider

Every mortgage has costs. You will pay fees to the lender and third parties. These include the appraisal fee. An appraisal checks the home's value. There are title fees. These make sure the property is legally yours. There are also recording fees paid to the local government.

The borrower also pays for home insurance and property taxes. These are often put into an escrow account. The lender pays them on your behalf from that account. You also pay interest on the loan. The interest rate can be fixed or adjustable. An adjustable-rate mortgage can change over time. The Freddie Mac HomeOne typically comes as a fixed-rate loan. This means your rate stays the same for the life of the loan.

Do not forget about mortgage insurance premiums. As noted, this is a monthly cost. Ask your lender for a Loan Estimate. This form lists all the costs. It helps you compare offers from different lenders. Shopping around can save you money.

Steps to Apply for a HomeOne Loan

Applying for a HomeOne loan is like applying for any mortgage. First, find a lender that offers the program. Not all banks do. Ask if they work with Freddie Mac on this product. Then, get pre-approved. The lender will look at your income, assets, and credit score. Pre-approval shows sellers you are serious.

Next, find a home and make an offer. Once the offer is accepted, you complete the full application. You provide documents like pay stubs and bank statements. The lender orders an appraisal. An underwriter reviews your file. They check that you meet all the rules. If approved, you go to closing. At closing, you sign the final papers and get the keys.

Some borrowers may need homeownership education. Freddie Mac offers free courses. These courses teach you about the home-buying process. They cover budgeting and home maintenance. Taking a course can make you a more prepared buyer. Ask your lender if it is required. Even if not required, it is a good idea.

Feature	HomeOne Loan	FHA Loan
Down Payment	3%	3.5%
Mortgage Insurance	Cancelable PMI	For the life of the loan (usually)
First-Time Buyer	Required for at least one borrower	Not required
Income Limits	Yes, based on location	No income limits
Property Type	Primary residence only	Primary or second home

The HomeOne loan is a powerful tool. It helps people purchase homes with less money up front. It is a safe, conventional product. Remember that mortgage insurance is part of the deal. But you can cancel it later. This saves money compared to an FHA loan. If you are new to purchasing property, this is one of the best loan options available.

Talk to a lender today. Ask if you meet the rules. Check the income limits in your area. You might be closer to purchasing a home than you think. The path to homeownership starts with asking the right questions.

Frequently Asked Questions

What is the minimum credit score for a HomeOne loan?

Most lenders look for a credit score of at least 620. This can vary slightly between lenders. A higher score might help you get a better interest rate. It is best to check your credit report before you apply.

Can I use the HomeOne program if I am not a first-time buyer?

Yes, you can, but only if you are purchasing with a first-time buyer. The rule requires at least one borrower to be a first-time homebuyer. If you are buying alone and have held a mortgage in the last three years, you do not qualify.

Does the HomeOne mortgage require private mortgage insurance?

Yes, it does. Because the down payment can be as low as 3%, mortgage insurance is required. This protects the lender if you default on the loan. You can request to cancel it once you have 20% equity in the home.

What are the income limits for the HomeOne program?

Income limits depend on the county where the home is located. They are based on the area median income. In most areas, the limit is 80% of the median income. In high-cost areas, the limit is higher. Your lender can tell you the exact limit for your area.

Can I refinance my current mortgage with HomeOne?

Yes, you can use the HomeOne mortgage to refinance your existing loan. This is allowed for a rate-and-term refinance. You cannot withdraw cash from your home equity with this program. The property must be your primary residence.