Freddie Mac HomeOne® Loan: A 3% Down Mortgage Option

Saving for a home can feel challenging, especially for buyers balancing rent, student loans, or everyday expenses while trying to build savings. Programs such as HomeOne® are designed to help qualified borrowers purchase a home sooner with a lower upfront investment.

The Freddie Mac HomeOne® program is a low-down-payment conventional mortgage option that allows eligible borrowers to buy a home with as little as 3% down. For many buyers, that can create a more realistic path to homeownership without requiring years of additional saving.

To help you make an informed decision, let’s review what a HomeOne® mortgage is, who qualifies, how the program works, and how it compares to other low down payment mortgage options.

What Is the Freddie Mac HomeOne® Loan?

The Freddie Mac HomeOne® mortgage is a conventional loan backed by Freddie Mac that allows qualified borrowers to purchase a primary residence with a down payment as low as 3%.

Unlike FHA loans, which are government-backed, HomeOne® is considered a conventional mortgage. That means borrowers use private mortgage insurance, commonly called PMI, instead of FHA mortgage insurance premiums.

Many buyers researching low-down-payment financing wonder, "What is a HomeOne® mortgage, and how is it different from other programs?” The main appeal is that you can combine a low down payment with conventional financing benefits, including the option to remove PMI later, once enough equity is built.

The program is primarily designed for first-time homebuyers, although certain repeat buyers may also qualify in some situations. For example, someone who owned a home several years ago but has rented for the last three years may still qualify under first-time buyer guidelines.

Who Qualifies for a HomeOne® Mortgage?

This program is designed to help a Freddie Mac first-time home buyer purchase a home with a lower upfront investment.

To qualify, at least one borrower on the loan must meet the definition of a first-time homebuyer. In most cases, that means they have not owned a primary residence during the previous three years.

The home being purchased must also serve as your primary residence. Vacation homes and investment properties are not eligible.

For this lending type, you must still meet standard conventional mortgage requirements involving:

• Credit history

• Income and employment verification

• Debt-to-income (DTI) ratio

• Asset documentation

• Property eligibility

As an example, a couple purchasing their first home together may qualify if one borrower meets the first-time buyer requirement, even if the other borrower owned a home many years ago.

HomeOne® Loan Requirements

While the low down payment often gets the most attention, lenders consider several aspects of a borrower’s financial profile when reviewing a HomeOne® application.

Approval is based on the overall picture, including credit history, monthly debts, income stability, and how the property will be used. Understanding these requirements in advance can help buyers identify areas they may want to strengthen before applying.

Credit Score

Most lenders typically look for a minimum credit score of around 620, although some lenders may require higher scores depending on the overall loan profile.

Individuals with stronger credit may receive lower interest rates and PMI premiums. For example, someone with a 740 score may qualify for more favorable terms than a borrower applying closer to the minimum requirement.

Down Payment

One of the biggest advantages of HomeOne® is the low down payment requirement.

For example, a qualified borrower may purchase a home with as little as 3% down. On a $300,000 home purchase, that equals a $9,000 down payment.

Some borrowers may also use eligible gift funds or down payment assistance programs to help cover upfront costs. This can be especially helpful for younger buyers who have a stable income but limited savings.

Debt-to-Income Ratio

For a HomeOne® Loan, you’ll need to meet conventional DTI ratio guidelines. This ratio compares monthly debt obligations to gross monthly income.

While exact limits vary by lender, many conventional loan programs prefer a DTI ratio of around 45% or lower. So a borrower earning $6,500 per month with a car loan, student loan payment, and credit card debt will need to show they can comfortably afford the new mortgage payment within qualifying limits.

Occupancy

The property financed through the program must be used as a primary residence. Eligible properties may include, but are not limited to, single-family homes, condominiums, and certain townhomes. However, borrowers cannot use the loan to purchase an investment property or vacation home.

HomeOne® vs HomeReady® Differences

HomeOne® and HomeReady® are both low-down-payment conventional mortgage programs, but they are designed for slightly different borrowers.

One of the largest differences is that HomeOne® income limits do not apply. HomeReady, on the other hand, includes income restrictions in many areas.

HomeReady® may offer additional flexibility for lower-income households, including certain co-borrower arrangements and alternative income considerations. HomeOne® is often viewed as the more straightforward option because you do not need to fit within local income caps.

For instance, a household earning above the area median income may not qualify for HomeReady® but could still qualify for a HomeOne® loan.

HomeOne® vs. Other Low Down Payment Loans

When comparing these programs, it’s important to look beyond the down payment requirement.

This is because FHA loans may work well for buyers with lower credit scores or prior credit challenges, but HomeReady® may be a better fit for lower-income households needing additional flexibility.

A Freddie Mac HomeOne® mortgage may appeal to individuals who want conventional financing without income restrictions.

Benefits of the HomeOne® Loan

One reason many buyers consider Freddie Mac HomeOne® financing is the combination of affordability and flexibility.

The low 3% down payment requirement can help borrowers buy sooner instead of waiting years to save a much larger down payment. This can matter in competitive housing markets where home prices continue increasing over time.

Another major advantage is that there are no HomeOne® income limits. Some low-down-payment programs restrict borrower earnings, but HomeOne® does not.

Beyond the lower down payment and lack of income caps, some borrowers may also appreciate the conventional loan structure. This is because, unlike FHA mortgage insurance, PMI on conventional loans can often be canceled once sufficient equity is reached.

An individual who builds equity through home appreciation and mortgage payments may eventually remove PMI and lower their monthly payment.

Drawbacks to Consider

While the program offers several advantages, some tradeoffs are important for you to consider.

For one, PMI is required when putting less than 20% down, which increases the monthly mortgage payment. Although PMI may eventually be removed, borrowers should still factor that cost into their budget.

Credit requirements may also be stricter than those of FHA financing. So, a borrower with significant credit challenges may find FHA approval easier.

The loan is additionally limited to primary residences only. Therefore, someone looking to purchase a rental property, vacation home, or second property would need an alternative financing option.

How Much Can You Afford with 3% Down?

For many buyers, the biggest advantage of a 3% down payment is the ability to enter the housing market sooner rather than continuing to rent while trying to save a larger amount upfront.

For example, for a $300,000 home purchase, a borrower making a 3% down payment would need $9,000 for the down payment before accounting for closing costs and other upfront expenses. For a $250,000 home purchase, the same 3% down payment would be $7,500.

That lower upfront requirement can free up cash for furniture, repairs, moving costs, or maintaining a stronger emergency fund after closing. However, because the loan amount is higher with a smaller down payment, borrowers should also expect higher monthly payments and PMI costs than with a larger down payment.

If you are comparing loan options, the lending professionals at First Residential Independent Mortgage can help you review payment estimates, PMI costs, and overall affordability.

How to Apply for a HomeOne® Loan

The application process typically starts with mortgage pre-approval.

During pre-approval, your lender will review your income, employment history, assets, debts, and credit profile to determine eligibility. Your lender can also help compare HomeOne® with FHA, HomeReady®, and other conventional loan programs so you can evaluate which option best fits your goals.

For many buyers, reviewing multiple loan scenarios side by side can make it easier to understand differences in monthly payments, cash needed at closing, and long-term costs.

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