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December 16, 2015

Tips, Bits & Lists: Day 3

Homeownership
HomeSteps

On the 3rd day of tips, bits & lists, we're answering the top questions about our 3% down mortgage – Home Possible Advantage®. It's helped make home possible for hundreds of qualified borrowers since it became available earlier this year and we continue to work on ways to responsibly increase access to this mortgage.  Here are your top questions:

Who is this mortgage for?

The Home Possible Advantage mortgage is for low- and moderate-income borrowers with limited savings, including first-time homebuyers.

What do I need to qualify for it?

Generally, you need to meet minimum credit requirements, earn no more than 100% of your area median income and have the funds to meet the down payment requirements and closing costs.  First-time homebuyers must participate in an acceptable borrower education program, like Freddie Mac's CreditSmart®.

Is this mortgage only for first-time homebuyers?

No, it's for all qualified low- and moderate-income borrowers with limited savings, including first-time buyers.  If you haven't purchased a home in the preceding three years, Freddie Mac considers you a first-time homebuyer.

Can my family help me with my down payment?

Yes, the 3% down payment can come from a number of sources, including personal funds, gift funds, grants and affordable second mortgages.

Will I have to pay private mortgage insurance (PMI) on my Home Possible Advantage mortgage? How much will this add to my payment?

Yes, like all conventional, conforming mortgages backed by Freddie Mac, loans without at least a 20% down payment require some form of credit enhancement or insurance, usually in the form of PMI. This serves as an added insurance policy that protects the lender/investor if you are unable to pay your mortgage.

The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $40 and $80 per month for every $100,000 borrowed.  And, once you've built equity of at least 20% in your home, making the amount you owe on your mortgage 80% or less of its value, you can cancel your PMI and remove that added expense from your monthly payment.

Can I use it to refinance my current mortgage?

Yes, Home Possible Advantage mortgages can be used for a "no cash out" refinance of an existing mortgage. It's available in 15-, 20-, and 30-year fixed-rate terms.

What other options are available to me if I don't qualify for a Home Possible Advantage mortgage?

You have a number of choices even if you don't have a 20% down payment – a growing number of today's buyers are putting down between 5-10%. Talk to a lender today.

What advice do you have for homebuyers in today's market? 

Do your homework. Understand how much you can afford and what to expect during the mortgage process

Read other posts in this series and stay tuned for the next 9 days of tips, bits & lists.

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