Freddie Mac will offer a $2,500 credit for very low-income purchase borrowers to help with down payment and closing costs amid elevated interest rates and low housing supply.
Effective March 1, the credit will be available for homebuyers earning 50% of area median income (AMI) or less through Freddie Mac’s Home Possible and Housing Finance Agency (HFA) Advantage mortgage products.
The credit can be used for down payments, closing costs, escrow and mortgage insurance premiums.
“Today’s announcement is a vital lifeline for would-be homeowners, as studies show that down payment and closing costs are among the largest barriers to homeownership for very low-income homebuyers,” Sonu Mittal, senior vice president and head of single-family acquisitions at Freddie Mac, said in a prepared statement.
“This new effort continues the progress we made in 2023 and is particularly important in today’s housing market, where elevated rates and low supply have created affordability challenges for many families,” Mittal added.
Freddie Mac’s announcement to provide a $2,500 credit for very low-income borrowers comes on the heels of Fannie Mae’s updates to its HomeReady product.
In January, Fannie Mae said it would offer a temporary $2,500 credit to borrowers with income less than or equal to 50% of the AMI limit for the subject property’s location.
The credit will be effective for whole loans purchased on or after March 1, 2024 until Feb. 28, 2025, and for loans delivered into mortgage-backed securities with issue dates on or after March 1, 2024 until Feb. 1, 2025.
Freddie Mac financed about 800,000 home purchases in 2023, with first-time homebuyers representing about 51% of these loans, according to the government-sponsored enterprise (GSE).
As part of the GSE’s efforts to make homeownership more accessible for low-income families, Freddie Mac rolled out DPA One, a free tool for lenders that matches borrowers with down payment assistance programs across the country.
With more than 2,000 DPA programs offered through state finance agencies as well as local and municipal sources, finding and comparing the many programs and their guidelines is challenging.
DPA One is aimed at tackling this difficulty and streamlines the available state programs into a single source that lenders can use to find and compare programs for their borrowers.