Mortgages with Temporary Subsidy Buydown Plans
Increase your market potential by offering borrowers lower initial payments and the stability of predictable payment increases.
Temporary subsidy buydown plans are a good fit for borrowers who have the capacity for higher earnings within a few years of obtaining a mortgage. Buydown plans allow borrowers to benefit from temporary subsidies of the monthly payment of principal and interest.
|Eligible Mortgage Products||
|Maximum LTV Ratios (without secondary financing)||
|Eligibility/Underwriting||Limited Buydown Mortgages||Extended Buydown Mortgages|
* See our selling system availability matrix for a list of specific mortgages eligible for sale best efforts or mandatory, servicing released.
|Special Delivery Requirements||
|Single-Family Seller/Servicer Guide||
|Property Type||Fixed-rate, 7/1 & 10/1|
ARMs and 7/6-month & 10/6-month ARMs
|5-1, 3-year* and 5-year ARMs|
|1-unit primary residence or second home Type||Yes||Yes|
|2-unit primary residence or second home||Yes||Yes|
|3-4-unit primary residence or second home||Yes||No|
* Extended buydowns are not permitted on 3-year ARMs
Temporary Subsidy Plans for Home Possible® Mortgages
Single-Family Seller/Servicer Guide Bulletin 2014-18 announced updated requirements for Home Possible Mortgages with temporary subsidy buydown plans, effective for mortgages with settlement dates on or after November 24, 2014.
Home Possible Mortgages with temporary subsidy buydown plans give you additional flexibility to qualify teachers, firefighters, law enforcement officers, healthcare workers, and military personnel and if an extended buydown is used, may boost their purchasing power by up to 30 percent.
Two types of buydown plans may be used with Home Possible Mortgages:
|Name of Buydown Plan||Description||Offering Eligibility||Eligible Property||Calculation of Monthly Housing Expense-to- Income Ratio|
An initial interest rate that is:
|Home Possible Neighborhood Solution Mortgages only||1-unit and 2-unit Primary Residence other than a Manufactured Home||Use the monthly payment at the initial (bought down) interest rate|
An initial interest rate that is:
|Home Possible and Home Possible Neighborhood Solution Mortgages||1-unit Primary Residences other than a Manufactured Home||
If the LTV ratio is greater than 95 percent:
If the LTV ratio is 95 percent or less:
In addition to the requirements above, buydowns plans, when used with Home Possible Mortgages must not:
- Have secondary financing with a variable interest rate
- Use Mortgage Credit Certificates (MCCs)
Freddie Mac's Temporary Subsidy Buydown Mortgages help you:
- Qualify more borrowers who have the capacity for higher earnings within a few years of obtaining a mortgage.
- Offer reduced initial payments with an initial, bought-down interest rate.
- Cross-market temporary subsidy buydowns with Home Possible Mortgages.
Benefits for Your Borrowers
Freddie Mac's Temporary Subsidy Buydown Mortgages, provides your borrowers with:
- Reduced initial payments with a temporarily reduced interest rate.
- Predictable payment increases based on the predetermined structure of an extended or limited buydown.
For More Information
- Call your Freddie Mac representative.
- Training Opportunities
Visit The Learning Center for live and recorded web conferences, access to classroom-style workshops and self-study tools – all designed to help you stay competitive, serve more borrowers and make it easier to do business with us.
The information in this document is not a replacement or substitute for information found in the Single-Family Seller/Servicer Guide and/or the terms of your Master Agreement and/or Master Commitment.