What is Freddie Mac's Home Possible® loan?

Even if your income isn’t as high as you’d like, you can still achieve your dream of owning your own home. How? If you can afford a monthly mortgage payment and a minimal down payment up front, Freddie Mac’s Home Possible® program only requires a 3% down payment, and it can be more flexible in crucial ways than other mortgage options.¹ Sounds promising, right?

So let’s go over what the Home Possible® mortgage program is and how to qualify. We’ll cover potential cost savings,  then we’ll dive into the pros and cons of the Home Possible® program and discuss some alternative loan options.

What is the Freddie Mac Home Possible^® program?

First, a little background: Freddie Mac is a government-sponsored enterprise (GSE) that was established by Congress in 1970 and operates under the Federal Housing Finance Agency (FHFA). It operates several loan services, including the Home Possible^® program, which helps low- and moderate-income borrowers qualify for a mortgage loan.

Created in 2014, the Home Possible^® loan has several key features: it requires a low down payment; you can cancel the mortgage insurance; and it has looser credit score, debt-to-income ratio (DTI) and loan-to-value ratio (LTV) requirements than other loan types.

Home Possible^® borrower requirements

In order to take out a Home Possible^® mortgage, you’ll have to meet a few borrower qualifications. Here’s a list of eligibility requirements you’ll need in order to secure financing through Home Possible^®:

• Down payment: The Home Possible^® program requires participants to pay a 3% down payment. Some eligible sources for down payment funds include funds sourced from checking and savings accounts, gifts, and grants.
• Credit score: If you’re interested in a manufactured home, an adjustable-rate mortgage or a no-cash-out refinance, you’ll need a 620 credit score to qualify with Home Possible^®.
• Income limit: Your total annual income cannot exceed 80% of your area’s median income (AMI). (To find out requirements in your area, check out Freddie Mac’s Income and Property Eligibility Tool.)
• Loan-to-value ratio: The LTV you’ll need to qualify for a Home Possible® loan ranges from 80% – 105%. Speak with your lender to see what LTV you’ll need in order to be declared eligible.
• Debt-to-income ratio: Freddie Mac doesn’t provide a maximum DTI requirement, though borrowers should aim for a DTI equal to or less than 50%. (This is a general DTI guideline when qualifying for a mortgage.)
• Property type: Only owner-occupied primary residences are eligible for Home Possible^® financing, as the program can’t be used to purchase investment properties, rental properties, or vacation homes. Eligible property types include single-family homes, multi-unit properties, condominiums, cooperative housing (co-ops), and manufactured homes.
• Mortgage insurance: You’ll have to pay a percentage of your total loan balance every year in mortgage insurance, and the amount due depends on factors like your LTV. But once your total loan amount drops below 80% of your home’s appraised value, you’ll be able to cancel the mortgage insurance on the Home Possible^® loan.
• Education program: If you are a first-time home buyer, you are required to take part in a consumer education program. The National Industry Standards Committee sets guidelines for homeownership education and counseling, and borrowers can sign up for local programs that meet these requirements. You can also browse online options with programs like ReadyNest and CreditSmart^®.

Who are Home Possible^® mortgages for?

Promoting affordable housing is a critical part of Freddie Mac’s mission. That said, this product is targeted at helping a specific segment of the market who could use assistance in home affordability. Your lender will be able to help you decide which option is right for you.

So, who should consider a Home Possible^® loan? Let’s go over the communities that the mortgage program may benefit the most.

Low-wage earners

In order to qualify for this particular loan option, the income of all borrowers used to qualify can’t be more than 80% of the area’s median income. This metric helps low income individuals afford homes. It lets them qualify for home affordability with a low down payment and often lower fees.

First-time home buyers

Although you don’t have to be a first-time home buyer to take advantage of the Home Possible^® program, it can be a great option if you are one. Keep in mind that both Fannie Mae and Freddie Mac consider a first-time home buyer to be anyone who hasn’t owned a residential property in the three years prior to the new home purchase.

Freddie Mac Home Possible^® advantages

There are several advantages to a Home Possible^® mortgage program, so let’s walk through some common pros for home buyers.

Low down payment

The first major benefit of this loan option is that it only requires a 3% down payment, which is lower than the minimum 3.5% down payment required for FHA loans.

Special offers available

Rocket Mortgage® has a special offer available on Home Possible® loans. We know that high rates and home prices make the market tough for many buyers, but we’re here to help you on this journey. You could save money via an upfront credit for your down payment or closing costs.

A loan level price adjustment (LLPA) credit of 1% of the loan amount up to $3,500 is available.² If the loan is below $200,000, the credit will be $2,000. If you make 50% or less of the area median income where you're looking to buy, you can receive a $2,500 grant. These funds can be used for down payment and closing costs.

Low loan-to-value ratio

Your LTV compares how much you owe on your loan to the value of your house and expresses this figure as a percentage. In most cases, you’re required to have an LTV somewhere between 80% – 95%, depending on the type of mortgage you’re getting.

With Home Possible^®, you may be able to finance up to 105% of your home’s total value through the Affordable Seconds^® secondary financing program. This program essentially functions as a second mortgage that can be used to fund your down payment and closing costs. Check with your lender to determine whether this could be an option for you, but keep in mind that Rocket Mortgage doesn’t offer purchase loans with second mortgages.

Flexible down payment sources

In addition to using a second mortgage to fund a down payment, you can also receive your down payment from gift funds (including from family members). For a one-unit primary residence, your entire down payment may come from a gift.

According to Freddie Mac, you can also fund a down payment through:

• Grants
• Sweat equity
• Proceeds from an unsecured mortgage loan
• Employee Assisted Housing (EAH)

Additional down payment assistance programs may also be available to you, so be sure to look around and explore all your options.

Manual underwriting available

Manual underwriting means someone goes through and evaluates your income, your credit history, the amount of assets you own, and the suitability of the property. This is different from automated underwriting, which involves computerized decision-making based on your loan application. Sometimes additional requirements, such as specific FICO^® scores, may apply. For some borrowers, the manual underwriting process may be helpful because there is more wiggle room than in the automated process. (Rocket Mortgage doesn’t currently offer manual underwriting for Home Possible^® loans.)

Lower fees and lenient credit requirements

Major mortgage agencies and government-sponsored enterprises like Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), and the U.S. Department of Veterans Affairs (VA) have specific fees that vary depending on the loan amounts and various risk factors.

With Home Possible®, the lowest median FICO^® Score to qualify is 620. However, if your median credit score is 680 or better, there are no additional pricing adjustments on the loan. If your score is below 680, there’s a maximum price adjustment of 1.5% of the loan amount.

Freddie Mac Home Possible^® disadvantages

An informed consumer should also know about the disadvantages to the Home Possible^® program, and they include:

Small mortgage lending network

Although many mortgage lenders offer Freddie Mac’s Home Possible^® loan, including Rocket Mortgage, this isn’t universal. You may have to shop around to find lenders that can extend a Home Possible mortgage.

Small borrower pool

The Home Possible^® loan has income limits and other requirements, so fewer borrowers qualify compared to the general housing market. Some lenders may choose not to offer this program because it’s not as prominent as other mortgage options.

Primary residence only

The Home Possible^® program is only available for primary residences — e.g., a home you occupy for the majority of the year. In other words, the loan program isn’t available for vacation homes or investment properties. The good news is that you can purchase up to four units, so you have the option to live in one unit and rent out the others.

Are there Freddie Mac programs for low-cost refinances?

Freddie Mac and Fannie Mae also offer new refinance programs to help low-income borrowers with higher DTIs to refinance and take advantage of lower rates and the opportunity to lower their payment.³ These programs are called Refi Possible℠ and RefiNow,™ respectively.

These programs have several requirements, however, including:

• The owner/investor of your loan must be Fannie Mae or Freddie Mac. You can find the source of your loan by using Fannie Mae's loan lookup tool or this utility from Freddie Mac.
• The programs are meant solely for low-income borrowers, which means you can’t make more than 80% of the area’s median income.
• Your DTI must be 65% or less, although this requirement is a bit more flexible than with other conventional loans.
• You must be current on your mortgage, which means you haven’t had a 30-day late payment in the last six months and only one in the last year.
• The property must be a one-unit primary residence — multi-unit, vacation, or investment properties are not eligible.
• The loan must be more than one year old but no more than 10 years old.
• Participating in these programs can only be used to lower your rate and/or make a term change. You can’t refinance to withdraw cash.

The bottom line: Freddie Mac Home Possible^® can help make homeownership possible

For some, Freddie Mac's Home Possible^® program can transform homeownership from a distant goal into an achievable reality. This powerful program, alongside Fannie Mae's similar HomeReady^® option, removes traditional barriers and creates pathways to building equity and establishing roots in your community.

With reduced costs and flexible qualification requirements, you can focus on what matters most – finding the perfect place to call home and building a foundation for your family's future. Your homeownership journey starts with exploring these opportunities that are specifically designed to make your dreams both accessible — and affordable.

¹ The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.

² Client will receive a 1 point (1.000) loan level price adjustment (LLPA) credit on Home Possible and HomeReady purchase loans locked on or after January 2, 2024 HomeReady loans must close by 2/27/2026. One point (1.000) is equal to 1% of the loan amount. Minimum credit amount will be $2,000. Maximum loan amount is $350,000. Clients with HomeReady loans locked after 1/28/2026 will receive a lender credit of $2,500 when their income is below 50% of the median in their area. Offer is not available with any other discounts or promotions. Offer cannot be retroactively applied to previously closed loans or loans already in process; offer is not transferable. Rocket Mortgage reserves the right to cancel/modify this offer at any time. Additional restrictions/conditions may apply. This is not a commitment to lend.

³ Refinancing may increase finance charges over the life of the loan.