For those who are buying their first home, one of the biggest issues is saving up enough cash for a large down payment. In some cases, an inability to put together that much money has led people to stay out of the housing market. However, home loan company Freddie Mac will start a new 3% down mortgage program this summer that might prove a perfect fit for first-time homebuyers. It’s designed to alleviate some of the stress involved in putting together a large chunk of cash before making a home purchase.
The program, called HomeOne, requires only a 3% down mortgage payment. That’s far lower than the 20% that buyers typically must put down on homes to avoid paying for private mortgage insurance.
The new program, which is aimed at first-time homebuyers, starts in July.
Qualifying for a 3% Down Mortgage
The HomeOne program differs from existing Freddie Mac low down payment mortgage offers. The main differences are that the new program focuses on first-time home buyers and does not restrict them based on geographic location or income level.
There is a substantial list of ways people must qualify for the HomeOne program. Some of the main qualifying rules include:
- HomeOne is only available for fixed mortgages
- At least one buyer must be a first-time homebuyer
- HomeOne is available for single family homes, condos and townhouses – but not manufactured homes
- At least one borrower must have a usable credit score
- HomeOne is not available for cash-out refinance mortgages
- HomeOne is not available for “super conforming loans”
- HomeOne is not available for a second home or for use in buying an investment property
The 3% down mortgage program is seen as important because first-time homebuyers make up almost half of all home purchases. By lowering the amount of down payment needed, it can lessen the stress on first-time buyers to accumulate cash needed for a large down payment and closing costs.
The Difference From Existing 3% Down Mortgage Plans
The HomeOne program essentially is an extension of the existing Freddie Mac program called Home Possible. That program concentrates on providing access to home loans for those in low to moderate income levels.
Freddie Mac decided to create the new program to stimulate first-time homebuyers across all income levels. Part of the reason is that rising home prices have made it more difficult for many first-time home buyers to enter the housing marketing, according to Investopedia..
Danny Gardner, a senior vice president at Freddie Mac, said in a news release that the HomeOne program is part of the company’s focus “to support responsible lending” and increase access to home loans for buyers.