Freddie Mac Home Possible Advantage(SM) Mortgage Makes Home Financing With a 3 Percent Down payment Possible!
Who is Freddie Mac?
Freddie Mac was established by Congress in 1970 to provide stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home ownership possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing.
Freddie Mac makes home ownership and rental housing more accessible and affordable. Operating in the secondary mortgage market, we keep mortgage capital flowing by purchasing mortgage loans from lenders so they in turn can provide more loans to qualified borrowers. Our mission to provide liquidity, stability, and affordability to the U.S. housing market in all economic conditions extends to all communities from coast to coast.
Freddie Mac launched Home Possible Advantage(SM), an affordable conforming, conventional mortgage with a three percent down payment requirement designed to make responsible home ownership accessible to more first-time buyers and other qualified borrowers with limited down payment savings.
"Home Possible Advantage gives qualified borrowers with limited down payment savings a responsible path to home ownership and lenders a new tool for reaching eligible working families ready to own a home of their own. Home Possible Advantage is Freddie Mac's newest effort to foster a strong and stable mortgage market." Freddie Dave Lowman, Executive Vice President, Single-Family Business at Freddie Mac.
Key Facts:
As defined by Section 203(k) of Housing and Urban Development’s code, the 203(k) loan allows the home buyer to borrow enough funds to cover both the cost of the home and the price of repairs, including the cost of labor and material for those repairs, in one loan. Certain 203(k) loans may also be expanded to include funding for up to six months of mortgage payments.
The FHA does not directly lend these funds, but rather provides financial protection to lenders that do. The 203(k) loan can either be a 15- or 30-year fixed rate mortgage or adjustable rate mortgage (ARM). The amount the homeowner can borrow depends on qualifications like his/her credit and income, and the lender will also assess a down payment based on the total amount.
With the 203(k) loan, the maximum loan amount that can be borrowed is capped at 110 percent of the home’s projected value as determined by an appraiser. Additionally, lenders require the borrower to pay mortgage insurance.
Interest rates could be slightly higher than those associated with a conventional mortgage. However, they might be significantly lower than interest rates on loans taken out to cover repairs. There are two types of 203(k) loans available:
Limited 203(k): This loan is intended for smaller renovation and upgrade projects that are valued less than $35,000. There is no minimum cost requirement, although you can’t fund structural repairs with a Limited 203(k).
Standard 203(k): The Standard 203(k) loan is intended for more extensive repairs with a total price tag greater than $35,000.
The minimal loan amount for this type is $5,000. Structural changes, like additions or full home renovations, are permitted. The home buyer must obtain architectural exhibits and meet building codes.
The homebuyer must meet specific borrowing criteria from FHA. This includes a debt to income ratio of 31 percent for the monthly housing payment and not more than 43 percent with all debt combined. Buyers must have a credit score of at least 620to qualify. Additionally, the buyer will still need to make a down payment of at least 3.5 percent of the total amount borrowed. NOTE: This loan is only available to people who will live in the home, although under certain situations, nonprofit organizations can also take out a 203(k) loan.
What kinds of renovations does the 203(k) loan cover?
The 203(k) loans cover just about any expense the homeowner can think of, with the exception of certain luxury items. Those renovations include:
