Down Payment Assistance with Freddie Mac Borrower Smart. Up to $2500 to be used towards down payment or closing costs.
Down payment is often the biggest obsticle to homeownership, especially for first-time home buyers who have been struggling to save up for their downpayment.
But the Freddie Mac BorrowSmart℠ program can take a bite out of your down payment and closing costs.
Check your BorrowerSmart Eligibility Here
What you need to know about Freddie Mac BorrowSmart Program:
The Freddie Mac BorrowSmart program can provide up to $2,500 in down payment/closing cost assistance based on area median income (AMI) and other eligibility criteria. It may be used to cover 100% of funds needed to close.
The program works in conjunction with the Freddie Mac Home Possible® and Freddie Mac HomeOneSM mortgage offerings, which require as little as 3% down. It can be used with fixed and adjustable-rate loans to purchase single-family homes, condos, planned unit developments (PUDs), and manufactured homes.
Freddie Mac BorrowSmart is a three tiered program. Assistance is based on the borrower’s qualifying income in relation to the county AMI of the purchase area.
LOW-INCOME PURCHASE:
Above 50% AMI and at or below 80% AMI
Home Possible program only
Down payment assistance: $1,250**
**Applies to loans with Homeownership Preservation Fund (HPF) Certificate of Eligibility dated on or after April 1, 2022. For loans with HPF Certificates dated between January 1, 2022 and March 31, 2022, available assistance is $1,000.
VERY LOW-INCOME PURCHASE:
At or below 50% AMI
Home Possible program only
Down payment assistance: $2,500
For example, if the AMI is $62,900 and your qualifying income is $45,000, you would be eligible for the Low-Income Purchase assistance of $1,000 since it is between 50% and 80% of the AMI.
Check your BorrowerSmart Eligibility Here
Example home purchase
Let’s look at how an eligible Freddie Mac BorrowSmart buyer with income below 50% of the AMI could benefit.
Costs
Purchase price: $250,000
Down payment: $7,500 (3%)
Closing costs: $3,750
Total needed to close: $11,250
Sources of funds
Seller credit: $1,000
2x Alaska PFD at $3200 each: $6400
Freddie Mac BorrowSmart Assistance amount: $2,500
Cash from buyer: $1350
This buyer’s cash requirement was reduced from $11,250 to just $1,350 thanks to flexibility with the Home Possible mortgage offering combined with Freddie Mac BorrowSmart.
Check your AMI and high needs area eligibility
If you’re like most people, you don’t know your city’s AMI off the top of your head. That’s okay. To find out, use Freddie Mac’s Home Possible Income and Property Eligibility Tool.
If your income is above 80% of the AMI, you’ll also need to be in a high needs area. On the eligibility search through the eligibility tool, the ‘High Needs Rural Tract’ will reflect “Yes” if eligible or “No” if not eligible.
If the property is eligible for Home Possible, you will see the Home Possible Income Limit listed, and then will determine the AMI you fall within, via the 50%, 80%, or 100% categories listed.
How to qualify for Freddie Mac BorrowSmart assistance
Freddie Mac BorrowSmart assistance is only available to buyers that meet certain requirements.
First, you need a qualifying income level at or below 100% of the AMI of the purchase area. Then, narrow down the property type and the purchase area (down to county and zip code).
Eligible property types include
Single family residences (1 to 4 units)
Condos
Planned unit developments
Manufactured homes (not eligible for HomeOne)
Freddie Mac BorrowSmart is available in all 50 states as of November 8, 2021, when Hawaii and Alaska are added.
They will guide you through the process and direct eligible borrowers to a HUD-certified counselor for pre-purchase counseling. This session costs $99 and takes 45-60 minutes. Upon completion, you’ll receive a certificate from HPF that’s valid for 12 months.
Finally, you must use a Freddie Mac HomeOne or Home Possible mortgage to be eligible for Freddie Mac BorrowSmart assistance.
Check your BorrowerSmart Eligibility Here
About HomeOne and Home Possible
HomeOne and Home Possible are Freddie Mac mortgage offerings that specifically fit the needs of first-time and low-income home buyers.
HomeOne
As the name suggests, HomeOne is a mortgage option for first-time home buyers with no geographic or income limits.
To qualify, at least one borrower must be a first-time home buyer, meaning they haven’t had ownership interest in a home for three years. If both borrowers are first-time homeowners, a home buyer education course is required.
Freddie Mac requires at least one borrower to have a usable credit history, but does not set a minimum credit score. However, lenders usually require a minimum credit score of 620-660.
HomeOne requirements:
Minimum 3% down payment
Fixed rate, conventional mortgage only
1-unit properties, including condos and planned unit developments (but not manufactured homes)
Must live in home as primary residence
Mortgage insurance required until borrower has 20% equity in home
Home Possible
The Home Possible program seeks to help very low- to low-income borrowers achieve home ownership by allowing a variety of down payment assistance, such as gifts from family, employer-assistance, secondary financing, sweat equity, BorrowSmart and more.
Home Possible borrowers must have a qualifying income of less than 80% of the AMI. Use this map to find the AMI of your purchase area. Unlike HomeOne, Home Possible is not restricted to first-time home buyers. If both borrowers are first-time home buyers, a home ownership education course is required.
This mortgage type is eligible for 1-4 unit properties, condos, planned unit developments and manufactured homes (with certain restrictions). One borrower must use the property as a primary residence, but non-occupying borrowers are allowed to be on the loan.
For single-unit purchases, borrowers are not required to use any of their own cash for the 3% minimum down payment – it can come entirely from gifts and down payment assistance.
Home Possible features:
Minimum 3% down
Variety of down payment assistance options
Minimum credit score of 620-680, depending on lender
Eligible for variety of fixed- and adjustable-rate mortgages
Borrowers can cancel mortgage insurance when they reach 20% equity
Summary: How to qualify for the BorrowSmart program
Following is a summary of basic qualification criteria for the program:
Your income is above 80% and at or below 100% of the AMI and the property is in a high needs area as indicated in the Freddie Mac Home Possible Income and Property Eligibility Tool
Your income is at or below 80% of the AMI
You are applying for a Freddie Mac HomeOne or Home Possible mortgage (no other loan types are compatible with BorrowSmart)
You are not buying a second home, investment property, or Co-op
Start now
For those eligible, the Freddie Mac BorrowSmart program is a relatively easy way to bring more money to the closing table or save money for expenses down the line. You might even learn a thing or two during the home buying counseling session.
Better yet, this assistance can be combined with gifts from family members and other down payment assistance.
Check your BorrowerSmart Eligibility Here
*Pre-approval is based on a preliminary review of credit information provided to First Rate Financial LLC, which has not been reviewed by underwriting. If you have submitted verifying documentation, you have done so voluntarily. Final loan approval is subject to a full underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.
Eligibility subject to program stipulations, qualifying factors, applicable income and debt-to-income (DTI) restrictions, and property limits.
