A Home Possible loan is a specialized mortgage designed by Freddie Mac to expand access to homeownership for low-to-moderate income buyers. Unlike government-insured loans such as FHA or VA loans, the Home Possible loan is a conventional mortgage that follows Freddie Mac’s guidelines to encourage lenders to provide affordable financing.
To qualify, your income generally must not exceed 80% of the Area Median Income (AMI) in the home’s location. Freddie Mac provides a convenient eligibility tool to check income limits by area. You must put down a minimum of 3%, but those funds can come from gifts, grants, or down payment assistance programs.
Credit requirements typically start at a score of 660, which is higher than an FHA loan but generally accessible to many borrowers with good credit. Property eligibility includes 1-4 unit primary residences, including condos, where the borrower occupies the home.
Because the down payment is under 20%, borrowers pay Private Mortgage Insurance (PMI), which is usually less expensive compared to FHA’s mortgage insurance premiums and can be canceled once you reach 20% equity. This PMI feature is explained further in our article on Private Mortgage Insurance (PMI).
Home Possible differs from FHA loans primarily due to its backing by Freddie Mac, more competitive interest rates, and cancellable PMI rather than a lifetime premium. This makes it a strong choice for borrowers with decent credit and limited cash savings.
If you’re considering a Home Possible loan, consulting with a mortgage professional can help you evaluate your options, including how it compares with programs like FHA loans or USDA loans.
References:
- Freddie Mac Home Possible® Mortgages: https://sf.freddiemac.com/working-with-us/affordable-lending/home-possible-mortgages
- Consumer Financial Protection Bureau: https://www.consumerfinance.gov/owning-a-home/loan-options/
- Freddie Mac Income Eligibility Map: https://sf.freddiemac.com/working-with-us/affordable-lending/home-possible-eligibility-map
For additional context, check related terms like Conventional Mortgage, PMI, and FHA Loan.
