For Decent Credit Score Buyers, The Home Possible Mortgage Helps Out

October 20, 2019 by Dan Green

Five government agencies make low-down-payment home loans available to buyers of homes, which puts those agencies in competition for your mortgage loan business.

Intra-agency competition means more loans options and better loan terms when you opt for a government-backed, low-down-payment loan.

One such product is the Home Possible® mortgage.

Home Possible® is a low-down payment home loan and a product of Freddie Mac. Its makeup is similar to another low-down payment loan — HomeReady® — which is backed by government agency Fannie Mae.

Home Possible is popular because it gives home buyers:

  • Access to low, government-subsidized interest rates
  • Ability to buy a house with a down payment of 3%
  • Means to use expected boarder income for a mortgage approval

Home Possible also lets parents and children buy a house together, on the same mortgage application, using all parties’ income and ages. Neither is required to be a first-time buyer, nor is there a requirement that the parents and children end up living in the same house.

Lenders call this scenario non-occupant co-borrower. You probably know it as “having a co-signer”.

The real strength of the Home Possible® mortgage, though, is its low interest rates for buyers — especially for buyers with better-than-average credit ratings.

When you use Home Possible and show good credit, your interest rates can be up to a half-percentage point lower as compared to buyers using comparable low-down payment loans.

At today’s mortgage rates, on a loan size of $250,000, a half-point off your interest rate equates to roughly $70 in savings per month.

Home Possible isn’t available to everyone. Lenders limit the program to people buying a house in average- or low-income neighborhoods; and, to buyers whose household income is below or near the average for an area.

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