While many of our Wasilla home-buying clients depend on an FHA-backed mortgage when they purchase their homes, there are other attractive loan products on the market that you should know about. This week I thought we’d take a look at one of the most popular loan products on the market today, Freddie Mac’s Home Possible®.
Who is Freddie Mac?
Freddie Mac, which is short for Federal Home Loan Mortgage Corporation, is what is known as a GSE or Government Sponsored Enterprise. Both it and Fannie Mae were created by Congress, Fannie in 1938 and Freddie in 1970. What they do, in a nutshell, is buy mortgages from lenders and either hang on to them or bundle them into what are known as “mortgage-backed securities” which are then sold to investors.
Freddie’s most important function, at least for real estate consumers, is that the money they spend buying these mortgages is then used by the lender to make more loans. In essence, they help ensure that there is always a continuous supply of mortgage money.
What is Home Possible?
Freddie Mac’s Home Possible® mortgages offer loans to low- and moderate-income homebuyers that need a low down payment. Yes, it does sound a little like the FHA program, but it differs in that Home Possible only requires 3 percent of the loan amount for the down payment and this money can come from sources disallowed by FHA. It also differs in its private mortgage insurance requirement. If you put down less than 20 percent you’ll still be required to purchase the insurance but you can cancel once your equity reaches 20 percent.
How to Qualify
You’ll need to meet the lender’s credit score requirements (typically 680, although you may qualify with a lower score), your earnings must not exceed 100 percent of the Wasilla area median income (AMI) and you’ll need proof of funds for the down payment and closing costs.
In 2015, Wasilla’s AMI for a family of four is $89,600, so to qualify for Home Possible you must not earn more than that. If this will be your first home you’ll also need to attend a homebuyer education course. We’re happy to answer questions about buying a home in Wasilla. Contact us at 907-885-3309.