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Frequently Asked Questions: Home Possible® Mortgages

These frequently asked questions about Home Possible mortgages will help you better understand some of the requirements surrounding Freddie Mac's low down payment offerings, including requirements for homebuyer education and lender gifts and grants.

Buyer and Property Requirements

  1. Should I include spousal or other household income in income qualifications if the spouse is not a borrower on the mortgage?
  2. Can a borrower qualify for a Home Possible mortgage if they own another property?
  3. Do you have to be a first-time homebuyer to qualify for a Home Possible mortgage?
  4. Do all Home Possible borrowers need to occupy the home they're purchasing as their primary residence?
  5. If no borrower on a loan application has a credit score, can I originate a Home Possible mortgage for that loan?
  6. Can I originate a Home Possible mortgage when I have a mix of borrowers with and without credit scores?
  7. The Guide states that a borrower's rental income from their one-unit primary residence can't exceed 30 percent of the total income used to qualify for a Home Possible mortgage. If more than 30 percent of a borrower's income is rental income, how much, if any, of that rental income can be used?
  8. If a borrower is seeking a special purpose cash-out mortgage, such as in a divorce settlement, can I originate a Home Possible mortgage for that purpose?

Closing Costs and Down Payment Assistance

  1. Can I give a gift or grant to assist with a borrower's down payment?
  2. If I can't contribute to a borrower's minimum three percent down payment, what sources of funds can contribute?
  3. Can I use premium financing to fund down payment?
  4. Can I use premium financing to fund closing costs and prepaids?
  5. Does a lender gift or grant need to be noted separately from other lender credits on loan estimate and closing disclosure documentation?
  6. What guidelines should I follow to show that a gift of funds is not funded by the mortgage process?

Borrower Education

  1. Can the mortgage insurance (MI) provider also provide the homebuyer education required for first-time homebuyers?
  2. Who can provide early delinquency counseling to borrowers?
  3. Do all Home Possible borrowers need to take a homeownership education course?
  4. If a borrower completed a HUD-approved homebuyer education program to qualify for a competing loan offering, but has since decided to use a Home Possible mortgage, will that education program fulfill the Home Possible education requirement?

Buyer and Property Requirements

  1. Should I include spousal or other household income in income qualifications if the spouse is not a borrower on the mortgage?

    Only borrower income can be included when determining eligibility for a Home Possible mortgage. You can't include a spouse's income, "household income" or any non-borrower income when qualifying a borrower.
  2. Can a borrower qualify for a Home Possible mortgage if they own another property?

    Yes, the borrower may have ownership interest in another residential property if they do not occupy the property, and the Seller documents that the borrower meets at least one of the following conditions:

    • They inherited an ownership interest in the property and share ownership with another party.
    • They own the property with another person who has been assigned the debt associated with the property by a court order, such as a divorce decree.
    • They are a cosigner or guarantor on a mortgage, and someone other than the borrower has made payments on that mortgage for at least the most recent 12 months.
  3. Do you have to be a first-time homebuyer to qualify for a Home Possible mortgage?

    No. However, a borrower seeking a Home Possible mortgage can't have an ownership interest in any other residential property except as described in question 3.
  4. Do all Home Possible borrowers need to occupy the home they're purchasing as their primary residence?
    Yes, all Home Possible borrowers must occupy the mortgaged premises as their primary residence.
  5. If no borrower on a loan application has a credit score, can I originate a Home Possible mortgage for that loan?
    Borrowers without a credit score can qualify for a Home Possible mortgage with a 95 percent maximum LTV in several ways:
    • Through Loan Product Advisor®, if they meet requirements in Single-Family Seller/Servicer Guide (Guide)Section 5201.1: Credit assessment with Loan Product Advisor.
    • Through manual underwriting, if they meet the requirements in Guide Section 4501.8: Underwriting requirements for Home Possible Mortgages.

    Borrowers without credit scores are not eligible for Home Possible Advantage® mortgages, which have a 97 percent maximum LTV.
  6. Can I originate a Home Possible mortgage when I have a mix of borrowers with and without credit scores?
    Yes, mortgages in situations where there are a mix of borrowers with and without credit scores can qualify for Home Possible mortgages in several ways:
    • Through Loan Product Advisor®, if they meet requirements in Guide Section 5201.1: Credit assessment with Loan Product Advisor.
    • Through manual underwriting, if they meet the requirements in Guide Section 4501.8: Underwriting requirements for Home Possible Mortgages.

    Please note that income contributed by a borrower with insufficient credit history can only account for up to 30 percent of the total qualifying income.
  7. The Guide states that a borrower's rental income from their one-unit primary residence can’t exceed 30 percent of the total income used to qualify for a Home Possible mortgage. If more than 30 percent of a borrower's income is rental income, how much, if any, of that rental income can be used?
    Rental income from a one-unit primary residence can only account for 30 percent of qualifying income. Any portion of the borrower's rental income from their one-unit primary residence which exceeds 30 percent of the total income can't be used to qualify a borrower. For rental income requirements, see Guide Section 4501.9: Borrower income and qualifying ratios for Home Possible Mortgages.
  8. If a borrower is seeking a special purpose cash-out mortgage, such as in a divorce settlement, can I originate a Home Possible mortgage for that purpose?
    No, a Home Possible mortgage cannot be a cash-out refinance mortgage. Only no cash-out refinance mortgages are eligible for Home Possible.

Closing Costs and Down Payment Assistance

(Recently updated in Guide Bulletin 2017-11)

  1. Can I give a gift or grant to assist with a borrower's down payment?

    A gift or grant from a lender is only allowed after a minimum three percent contribution is made from borrower personal funds or other eligible sources of funds.
  2. If I can't contribute to a borrower’s minimum three percent down payment, what sources of funds can contribute?

    Aside from their own funds, a borrower can receive assistance in reaching the minimum three percent contribution from a range of sources, including a gift from a person meeting the Guide definition of a related person, funds from a governmental or non-governmental agency, Employer Assisted Homeownership (EAH) programs and Affordable Seconds®. Any contributing agencies cannot be affiliated with the lender or the origination of the mortgage except in the case of an EAH.
  3. Can I use premium financing to fund down payment?

    No, down payment assistance can't be funded through the mortgage transaction in any way including through points, price, fees or any activity that might be described as premium financing.
  4. Can I use premium financing to fund closing costs and prepaids?

    Yes, you can use premium financing to assist a borrower with closing costs, financing costs and prepaids/escrows.
  5. Does a lender gift or grant need to be noted separately from other lender credits on loan estimate and closing disclosure documentation?

    Yes, the lender grant should be shown as a separate line item on the Loan Estimate (LE) and the Closing Disclosure (CD) apart from any other lender credit provided such as a refund of the appraisal fee.
  6. What guidelines should I follow to show that a gift of funds is not funded by the mortgage process?

    You should be able to show that:
    • Funds came from an established program that was fully vetted through your risk management team.
    • Funds were allocated for the sole purpose of contributing to loans originated to low- or moderate-income borrowers, or to properties located in low- or moderate-income areas.
    • The lender is not affiliated directly or indirectly with an interested party to the transaction.

Borrower Education

  1. Can the mortgage insurance (MI) provider also provide the homebuyer education required for first-time homebuyers?

    Yes, although homebuyer education can't be provided by the Seller, originating lender or an interested party, MI companies can provide the required homebuyer education. You can also meet this requirement by HUD-approved counseling agencies, housing finance agencies (HFAs), community development financial institutions (CDFIs) or programs that meet National Industry Standards for Homeownership and Counseling. Borrowers may also choose to take our free homebuyer training CreditSmart® – Steps to Homeownership.
  2. Who can provide early delinquency counseling to borrowers?

    A Seller or Servicer must provide early delinquency counseling to borrowers who have problems meeting their mortgage obligations. The counseling may be provided by a non-profit, third-party homeownership counseling agency, a HUD-approved national counseling agency specified by Freddie Mac or the Servicer itself, provided it has the resources to provide counseling comparable to the other options. For details, refer to Guide Section 9101.2: Servicer collection efforts for Mortgages secured by Primary Residences.
  3. Do all Home Possible borrowers need to take a homeownership education course?

    No. Homeownership education is only required when all borrowers are first-time homebuyers or if the credit reputation for all borrowers is established using only Noncredit Payment References. In both instances, at least one borrower must complete a homeownership education program before the mortgage's note date.
  4. If a borrower completed a HUD-approved homebuyer education program to qualify for a competing loan offering, but has since decided to use a Home Possible mortgage, will that education program fulfill the Home Possible education requirement?

    Yes, if the program meets our requirements it would fulfill Home Possible homebuyer education requirements. For details on education requirements see Guide Section 5103.6: Homeownership education.

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