What Is the Freddie Mac Home Possible® Loan?

Buying your first home can feel challenging, especially if you have a lower or moderate income. Freddie Mac’s Home Possible® program helps make homeownership more attainable by offering low down payments and flexible qualification guidelines for eligible borrowers.

Freddie Mac, short for the Federal Home Loan Mortgage Corporation (FHLMC), is a government-sponsored enterprise that helps keep mortgage funds available and affordable. It does this by purchasing loans from lenders, which frees up money so those lenders can offer more home loans to borrowers.

Freddie Mac guarantees the loan for borrowers who meet specific requirements, which encourages lenders to approve loans for applicants who would not qualify for a typical conventional mortgage.

Home Possible® Loan Eligibility

Freddie Mac outlines several eligibility criteria for borrowers, including:

• A credit score of 660 or higher
• A debt-to-income rate of 43% or lower
• A down payment of 3%
• Proof of stable employment and income
• A combined income for all borrowers of no more than 80% of the area’s median income
• Proof that at least one borrower will be a full-time resident in the property

These are the minimum standards set by Freddie Mac guidelines, but lenders may impose stricter qualification requirements. Because income plays a key role in determining eligibility, it’s also important to understand the Home Possible® income limits set by Freddie Mac.

Home Possible® Income Limits

Since income levels and home prices vary significantly across the country, the Home Possible® eligibility guidelines for income fluctuate based on zip code. To qualify for the Home Possible® program, the combined income of all borrowers must not exceed 80% of the area’s median income.

For example:

• In Minneapolis, MN, the median income is $104,300, so the Home Possible® limit is $83,440.
• In Lebanon, TN, the median income is $82,300, so the Home Possible® limit is $65,840.

To make this easier for potential borrowers exploring the program, Freddie Mac put together a helpful eligibility map that displays median incomes and Home Possible® income limits across the country.

Home Possible® Loan Limits

Freddie Mac uses conforming loan limit rules, which change annually, to determine the maximum loan amount a borrower qualifies for under the program. The conforming loan limits in 2025 for one-unit properties range from $806,500 to $1,209,750, depending on the zip code. In 2026, the conforming limits will range from $832,750 to $1,249,125 for one-unit properties. 

Education Requirements for Home Possible®

In addition to its mission of making housing affordable, Freddie Mac also promotes responsible homeownership. A first-time homebuyer, as defined by Freddie Mac, is an individual who has had no ownership interest in a residential property within the past three years. All first-time homebuyers must complete a homeownership education course provided by a HUD-approved education agency. In addition to several in-person options, Freddie Mac offers several convenient online course options through CreditSmart or ReadyNest.

Pros of the Home Possible® Program

The Home Possible® program offers several advantages. Let’s break them down.

Low Down Payment

The Home Possible® Program offers a lower down payment than FHA loans. Home Possible® loans require only 3% down (compared to the FHA down payment minimum of 3.5%) and provide several options for gathering down payment funds without digging into your own pocket.

Potentially Lower Interest Rates

The interest rates on Home Possible® loans are comparable to those of the Conventional 97 loan, which are typically lower than the interest rates offered for FHA loans. Interest rates will vary based on the lender, loan-to-value (LTV) ratio, borrowers’ credit scores and other factors. But assuming you meet the requirements, you could qualify for a lower interest rate with Home Possible® than with other mortgage programs.

Allowance of Non-Occupant Co-Borrowers

Freddie Mac does grant an exception for non-occupant co-borrowers, meaning not all borrowers are required to live in the home. At least one borrower must occupy the property after closing, so Home Possible® won’t work for investment properties, but the non-occupant allowance can help borrowers with lower credit to qualify with a co-signer.

Low Mortgage Insurance Costs

You may spend significantly less on Private Mortgage Insurance (PMI) costs, especially if you have a larger down payment. FHA loans require 0.85% of the loan amount per year for most borrowers, but Home Possible® borrowers could qualify for PMI as low as 0.5%, depending on credit scores and the LTV ratio. Even better, PMI can be removed from a Home Possible® loan entirely once the LTV ratio drops below 80% (meaning at least 20% of the property value has been repaid).

No Up-Front Mortgage Insurance Cost

In addition to monthly PMI costs, FHA loans require an upfront mortgage insurance fee of 1.75% of the loan amount. With Home Possible®, there are no up-front mortgage insurance costs.

Cons of the Home Possible® Program

As with any mortgage program, there are always a few drawbacks. It’s important as a borrower to be aware of them.

Income Limits

The income of all borrowers on the loan must not exceed 80% of the median income for the area where the property is located. Borrowers in certain areas with lower median income levels may struggle to meet this qualification requirement.

Loan Limits

While there is no specified maximum loan limit for Home Possible®, the program is subject to conforming county loan limits set by the Federal Housing Finance Agency (FHFA). Since borrowers can only earn 80% of the median income for their area and the maximum debt-to-income ratio (including the Home Possible® mortgage) is 43%, your maximum loan limit under the program will be affected by your geographic area, current income, and existing debt.

Higher Credit Score Requirements

Home Possible® loans require a minimum credit score of 660 for all borrowers. That’s higher than the 620 credit score minimum many lenders, including First Residential, typically require for conventional loans, and well above the 580 minimum for FHA loans. First Residential typically requires a credit score of 620 or higher for FHA loans as well.

Residency Requirements

Although non-occupant borrowers are allowed on the loan for one-unit properties, at least one of the borrowers must reside in the home full-time after closing. This requirement means that a Home Possible® loan cannot be used for vacation homes or investment properties where the borrower does not live on-site.

Home Possible® vs HomeReady® Program

First-time homebuyers or low-income borrowers may be exploring various mortgage options to achieve homeownership. In addition to Freddie Mac’s Home Possible® Program, a similar option is available through Fannie Mae’s HomeReady® Program.

The two programs are similar in that they both target first-time and low-income borrowers, offering similar benefits, including low down payments, cancellable PMI, and comparable qualification requirements. The most significant difference is the credit score requirement. The Home Possible® financing requires a minimum of 660, while HomeReady® borrowers can qualify with scores as low as 620.

To determine which home loan program is best for you, talk with a First Residential loan expert today.