Home Possible® Changes: Staying Up-to-Date on the Latest LTV Requirements

The mortgage industry is ever-changing. At MortgageDepot, it’s our job to keep pace with the updates and pass critical info along to our clients. Today, we’re here to share some industry news that will affect many borrowers. Here’s the scoop: Conventional lenders have increased the LTV up to 95% for some borrowers using Freddie Mac’s Home Possible® program.

Home Possible® Updates: The Details

As of November, Freddie Mac is accepting an LTV of up to 95% for borrowers who plan to purchase a property with between two and four units. As always, certain restrictions and requirements apply. Here is what you need to know:

• This new figure only applies to primary residence properties.
• Non-occupying co-borrowers are not permitted on transactions involving properties with 2–4 units.
• High-balance loans cannot qualify for this program.
• Properties with accessory units cannot qualify for this program.
• The maximum CLTV is 105%, with a Down Payment Assistance program approved by Freddie Mac.
• Borrowers who wish to purchase a property with 3–4 units and have an LTV of more than 80% will require a minimum credit score of 720 and a maximum DTI of 45%.
• The borrower’s income must fall under 80% of Freddie Mac’s Area Median Income (AMI). Not sure if you qualify? Check your eligibility here.
• The borrower must attend a homebuyer education class and receive a certificate of completion before closing.
• The maximum debt-to-income (DTI) ratio is 50%.
• Borrowers may pay off their revolving debt to qualify.
• On all property purchases with 2–4 units and an LTV greater than 80%, the borrower must have a minimum down payment of 3%. This requirement is waived if the borrower has a second mortgage from an approved Down Payment Assistance program.
• Flipped properties involved in a non-arm’s length transaction do not qualify for this program.
• Lender-paid mortgage insurance on properties with 3–4 units isn’t allowed.

A Note About Quality Control Reviews

A Quality Control (QC) Review is a process that ensures that the mortgage application is accurate. A separate underwriter conducts the review to ensure loan compliance.

Here are a few noteworthy facts about QC Reviews and Home Possible® requirements:

• All mortgages for properties with 2–4 units in New Jersey require a QC Review before closing.
• In all other states, mortgages for properties with 3–4 units require a QC Review before closing.
• Borrowers involved in a non-arm’s length transaction require a QC Review before closing. A non-arm’s length transaction is a contract between two parties that have a relationship with each other. They could be family, friends, coworkers, etc.
• Correspondent loans don’t require a QC Review.

Don’t Skip This! Landlord Education

If you plan to purchase a property with 2–4 units, either you or a co-borrower must pass a landlord education course. Here are four examples to check out:

• Essent® Homebuyer Education Program
• Radian Homeownership Education
• Enact Education Options for Homebuyers

Contact MortgageDepot Today!

Are you intrigued by the Freddie Mac Home Possible® program? Are you struggling to keep up with changes in the mortgage industry? We can help! Contact our experienced loan officers today to hear the latest happenings behind the mortgage desk and determine if you qualify for the Home Possible® program under its new requirements.

Connect with one of our loan consultants to learn more.