MCLEAN, VA - Working families and many key community workers - police, firefighters, teachers, and healthcare workers - from across the nation can now take advantage of Home Possible(sm) Mortgages - a new suite of low down payment mortgage products with flexible credit underwriting standards that is expected to help thousands of families with savings issues or imperfect credit become homeowners, announced Freddie Mac, one of the nation’s largest investors in residential mortgages.

“We created Home Possible Mortgages so more lenders can say ‘Yes’ to more borrowers,” said David Stevens, senior vice president of single family sourcing at Freddie Mac. “Home Possible is what our lenders tell us they need to compete in today’s market: a flexible, easy-to-use mortgage uniting Loan Prospector’s ease and efficiency with exceptionally low down payments and flexible credit. Perhaps no other mortgage product launched in recent memory will enable our lenders to reach and help as many additional borrowers as Home Possible.”

The new Home Possible Mortgage combines borrower education and early delinquency counseling, zero and three percent down payment mortgage products, and flexible credit requirements so low- and moderate-income borrowers anywhere in the country can get an affordable, low-cost, conforming conventional mortgage for a single family property with as little as $500 of the down payment or closing costs coming from their own funds.

“Home Possible Mortgages underscore Freddie Mac’s determination to fulfill our public mission to expand affordable mortgage opportunities and our conviction that the home is the foundation of America’s ‘ownership’ society,” added Robert Tsien, Freddie Mac’s senior vice president, mission division. “We will continue to build on Home Possible so our lenders can give borrowers even greater opportunities to achieve their financial goals.”

How Home Possible Works

The basic Home Possible mortgage is available either as a 100 percent loan-to-value mortgage that borrowers can use for single-family home purchases and no cash-out refinancing, or as a 97 percent LTV mortgage for one-to-four unit properties. Both the zero and 3 percent down payment versions of Home Possible allow borrowers to put down as little as $500 from their personal funds towards the down payment and closing costs for a one-unit property. Two-unit properties require borrowers to put in 3 percent of the property’s value; 3-4-unit properties and manufactured homes require a 5 percent borrower contribution.

By combining a temporary subsidy buy down with a higher debt-to-income ratio, Home Possible Neighborhood Solution(sm) is designed to boost the home buying power of teachers, firefighters, law enforcement officers, and health care workers by as much as 30 percent. For example, a borrower with adequate reserves earning $2,761 a month and making a 3 percent down payment can boost her home buying power from $200,000 to $260,400 by opting for a Home Possible Neighborhood Solution Mortgage over standard 97 percent LTV mortgages, all other things being equal.

Home Possible Neighborhood Solution Mortgages allow for even higher debt-to-income ratios than a typical high LTV mortgage as well as a three-year subsidy buy-down that reduces the initial interest rate as much as 1.5 percentage points in the first year and 0.5 percentage points per year for the next two. The buy downs can come from a wide range of sources, such as gifts or grants. Qualified borrowers can use Home Possible Neighborhood Solution Mortgages to finance 1-2 unit properties in or near the communities they serve.

Both Home Possible and Home Possible Neighborhood Solution Mortgages are available as 15-, 20- and 30-year fixed rate mortgages or as 7/1 or 10/1 adjustable rate mortgages for one-unit properties.

To qualify, borrowers can earn up to their area’s median income or - if they earn more than the area median income - can buy or refinance a home in an underserved market area. All borrowers must complete a pre-purchase borrower education program. A 2001 Freddie Mac study found that pre- and post-purchase counseling programs significantly reduce mortgage delinquencies and help more borrowers succeed as long-term homeowners.

Source: Freddie Mac Press Release