Freddie Mac Home Possible is a mortgage program designed to help low to moderate-income borrowers purchase a home. One of the key factors that determine eligibility for this program is income. In this article, we will discuss Freddie Mac Home Possible income limits and how they may impact your ability to qualify for this program.
What is Freddie Mac Home Possible?
Freddie Mac Home Possible is a mortgage program that offers flexible underwriting guidelines and low down payment options to help eligible borrowers purchase a home. This program is designed to make homeownership more accessible to low to moderate-income borrowers by offering competitive interest rates, reduced mortgage insurance premiums, and other benefits.
Freddie Mac Home Possible Income Limits
One of the most important factors in determining eligibility for Freddie Mac Home Possible is income. The program has income limits that vary depending on the location of the property and the number of people in the household. The income limits are based on the area median income (AMI) and are determined by the U.S. Department of Housing and Urban Development (HUD).
Income Limits by Location and Household Size
The income limits for Freddie Mac Home Possible vary depending on the location of the property and the number of people in the household. In general, the income limits are higher in areas with a higher cost of living. Here are the 2021 Freddie Mac Home Possible income limits by location and household size:
For properties located in the continental United States:
- 1-person household: $83,120
- 2-person household: $95,040
- 3-person household: $107,960
- 4-person household: $119,880
For properties located in Alaska, Guam, Hawaii, and the U.S. Virgin Islands:
- 1-person household: $124,680
- 2-person household: $142,800
- 3-person household: $160,920
- 4-person household: $179,040
How Income Limits Impact Eligibility
If your income exceeds the Freddie Mac Home Possible income limits for your location and household size, you may not be eligible for this program. However, there are other factors that may be taken into consideration when evaluating your eligibility, such as your credit score, employment history, and debt-to-income ratio.
If you are close to or slightly above the income limits, you may still be eligible for Freddie Mac Home Possible if you can demonstrate that you have sufficient residual income after paying your monthly housing expenses. Residual income is the money you have left over after deducting your monthly housing expenses and other debt payments from your monthly income.
What is the Maximum CLTV for Home Possible?
The maximum Combined Loan-to-Value (CLTV) ratio for Freddie Mac Home Possible mortgages is 105%. This means that the total amount of all mortgages on the property cannot exceed 105% of the property’s value. For example, if the property is worth $200,000, the total amount of all mortgages cannot exceed $210,000 (105% of $200,000). It’s important to note that the first mortgage must be a Home Possible mortgage, and any secondary financing must meet specific eligibility requirements.
What is the Max DTI on Freddie Mac?
The maximum debt-to-income (DTI) ratio allowed for a Freddie Mac mortgage varies depending on the specific loan program. For most programs, the maximum DTI ratio is 45%. This means that the borrower’s total monthly debt payments, including the mortgage payment, cannot exceed 45% of their gross monthly income. However, some programs may allow for a higher DTI ratio, up to 50%, if the borrower meets certain eligibility requirements and has compensating factors, such as a strong credit score or significant cash reserves. It’s important to note that lenders may have their own DTI requirements, and borrowers should work with their lender to determine their specific eligibility for a Freddie Mac mortgage.
What are Fannie Mae and Freddie Mac guidelines?
Fannie Mae and Freddie Mac are government-sponsored enterprises that provide liquidity to the mortgage market by purchasing and guaranteeing mortgages from lenders. These entities have established guidelines that lenders must follow when underwriting and originating mortgages that they plan to sell to Fannie Mae or Freddie Mac. These guidelines cover various aspects of the mortgage process, including borrower eligibility, property requirements, loan-to-value ratios, debt-to-income ratios, and credit score requirements. The guidelines are designed to promote responsible lending practices and ensure that the loans being purchased by Fannie Mae and Freddie Mac meet certain quality standards. Lenders must adhere to these guidelines in order to sell their loans to Fannie Mae and Freddie Mac, which helps ensure the availability of affordable mortgage financing for borrowers.
Does Freddie Mac have a 3% Down Program?
Yes, Freddie Mac offers a 3% down payment program called Home Possible. This program is designed to help low to moderate-income borrowers who may not have a large down payment saved up to purchase a home. Home Possible mortgages have flexible underwriting guidelines and reduced mortgage insurance requirements, which can make them a more affordable option for borrowers. To qualify for a Home Possible mortgage, borrowers must meet certain eligibility requirements, including income limits and credit score minimums. Additionally, borrowers must contribute at least 3% of their own funds towards the down payment, with the remaining funds allowed to come from gift funds or other eligible sources.
Conclusion
Freddie Mac Home Possible is a mortgage program that offers flexible underwriting guidelines and low down payment options to help low to moderate-income borrowers purchase a home. Income is a key factor that determines eligibility for this program, and the income limits vary depending on the location of the property and the number of people in the household. If you are considering applying for this program, it is important to review the income limits for your area to determine if you are eligible.
