Home Possible Mortgage: A 3% Down Payment Option
Home Possible is a conventional mortgage program from Freddie Mac. It's designed for borrowers with good credit who may not have a large down payment saved up. The program requires 3% down and has income limits based on where you buy.
What Is a Home Possible Mortgage?
The main thing to know about Home Possible is that it's designed for borrowers with good credit who may not have a large down payment saved. The program requires a minimum credit score of 620 and allows 3% down payments.
A Home Possible mortgage is a conventional loan from Freddie Mac - it's not government-backed like FHA or VA loans. The program was created for borrowers with good credit who might not have a large down payment saved. It offers reduced private mortgage insurance (PMI) rates, which can mean lower monthly payments compared to other low-down-payment options.
Key Facts at a Glance
| Requirement | Home Possible Mortgage |
|---|---|
| Minimum Credit Score | 620 |
| Minimum Down Payment | 3% |
| Current Average Rate | 6.50% |
| Income Limits | 80% of Area Median Income |
| Suitable For | Low-to-moderate income borrowers with good credit |
Key Definitions
Here are the key terms you'll encounter when exploring Home Possible loans:
- Area Median Income (AMI)
- The midpoint income for a specific area, meaning half of the households earn more and half earn less. Home Possible requires income at or below 80% of AMI. See our Income Limits Guide for details.
- Private Mortgage Insurance (PMI)
- Insurance required when your down payment is less than 20%, protecting the lender if you default. Home Possible offers reduced PMI rates compared to standard conventional loans. See our PMI Guide.
- Debt-to-Income Ratio (DTI)
- The percentage of your gross monthly income that goes toward debt payments. Home Possible allows DTI up to 50% with compensating factors.
- Loan-to-Value Ratio (LTV)
- The ratio of your loan amount to the home's appraised value. Home Possible allows up to 97% LTV with 3% down payment.
- Non-Occupant Co-Borrower
- A co-borrower who won't live in the home but whose income can be used to help you qualify for the mortgage.
- Accessory Dwelling Unit (ADU)
- A secondary living space on your property, such as a basement apartment or in-law suite, that can generate rental income to help you qualify.
Who Is the Home Possible Program For?
The Home Possible program has specific eligibility requirements. Here's who typically qualifies.
| Qualification Requirement | Description |
|---|---|
| Low-to-Moderate Income | Your income is at or below 80% of your area's median income (AMI). This is the program's primary requirement. |
| First-Time or Repeat Home Buyer | The program is open to everyone, whether it's your first home or you've owned one before. |
| Limited Cash for Down Payment | You can get into a home with as little as 3% down, and the funds can come from gifts, grants, or other sources. |
| Credit Score of 620 or Higher | A credit score of 620 is the minimum needed to qualify, making it accessible for those still building their credit history. |
| Needs Flexible Income Qualification | You can use income from a co-borrower, a boarder, or a rental unit (like a basement apartment) to help you qualify for your mortgage. |
Home Possible Loan Benefits
Home Possible offers several distinct advantages that make it an attractive option for home buyers who meet the requirements. These benefits are designed to reduce the costs and simplify the process of buying a home.
| Benefit | How It Helps You |
|---|---|
| Low 3% Down Payment | Reduces the biggest hurdle for many buyers, requiring just a 3% down payment. |
| Flexible Funding Sources | Your down payment and closing costs can be funded through personal savings, gifts from family, or grants from down payment assistance programs. |
| Cancellable Mortgage Insurance | Unlike FHA loans, the private mortgage insurance (PMI) on a Home Possible loan can be cancelled once you reach 20% equity in your home, lowering your monthly payment. |
| Co-Borrower & Rental Income | You can include income from non-occupant co-borrowers (like a parent) or rental income from an accessory dwelling unit (ADU) to help you qualify. |
| Favorable Pricing & Rates | Borrowers who meet the requirements often receive better-than-average mortgage rates and lower PMI costs, saving you money over the life of the loan. |
Home Possible Loan Requirements for 2025
To qualify for a Home Possible loan, you and the property you're buying must meet a specific set of criteria established by Freddie Mac. These requirements ensure the program serves its intended audience of low-to-moderate-income buyers.
Earn No More Than 80% Of Your Local AMI
Your household income cannot exceed 80% of the Area Median Income (AMI) for the home's specific location. Because Home Possible is for low-to-moderate income households, these income limits are strict.
Use the calculator below to find the AMI Income Limit for where you live.
Check AMI Income Limits for Home Possible
Enter any U.S. property address to see its AMI Income limit.
Based on Freddie Mac area limits; amounts may change. Home Possible® is a registered trademark of Freddie Mac.
Make A Downpayment Of 3% Or More
The minimum down payment for a Home Possible loan is 3% of the home's purchase price. These funds can come from various sources, not just your own savings. This flexibility makes it easier to gather the necessary funds for closing. See our Down Payment Guide.
Have A Credit Score Of At Least 620
A minimum credit score of 620 is required for a Home Possible loan. Freddie Mac uses the FICO scoring model, which gives less weight to medical debt collections. If you don't have a credit score, you may still be able to use non-traditional credit history, such as a history of on-time rent and utility payments. See our Credit Score Guide.
Attend A Homeownership Education Course
If all borrowers on the loan are first-time home buyers, at least one person must complete a homeownership education course. Freddie Mac offers its own free online course, HomeView, which fulfills this requirement.
Comparing Home Possible, FHA, and HomeReady Loans
When looking for a low-down-payment mortgage, you'll likely come across several options. Home Possible, FHA, and HomeReady (from Fannie Mae) are three of the most popular choices.
| Feature | Home Possible | HomeReady | FHA Loan |
|---|---|---|---|
| Minimum Down Payment | 3% | 3% | 3.5% |
| Credit Score Minimum | 620 | 620 | 580 |
| Mortgage Insurance | Cancel at 20% equity | Cancel at 20% equity | MIP for life |
| Income Limits | 80% of Area Median Income | 80% of Area Median Income | None |
| Property Type | 1–4 unit home, condo, co-op, manufactured | 1–4 unit home, condo, co-op, manufactured | 1–4 unit home, condo, manufactured |
| Occupancy Type | Primary residence only | Primary residence only | Primary residence only |
| Upfront Insurance | None | None | 1.75% upfront MIP |
📊 Key Statistic
What To Do If...
My income is too high for Home Possible
Home Possible is designed for low-to-moderate income borrowers. If your income exceeds the 80% AMI limit, you have several excellent alternatives:
| Alternative Program | Income Requirements | Credit Score | Down Payment |
|---|---|---|---|
| Conventional 97 | No income limits | 620 | 3% |
| FHA Loan | No income limits | 580 | 3.5% |
| Standard Conventional | No income limits | 620 | 3-20% |
Check Your Income Limit Use Freddie Mac's AMI Lookup Tool to see if you qualify for Home Possible in your area.
My credit score is below 620
Home Possible requires a minimum credit score of 620. If your score is lower, here are your options:
| Action | Timeline | Impact |
|---|---|---|
| Pull credit reports | Today | Free |
| Dispute errors | 30 days | Up to 100 points |
| Pay cards below 30% | This month | Up to 150 points |
| Auto payments | This week | Prevents late fees |
Alternative Programs for Lower Credit Scores:
| Program | Minimum Credit Score | Down Payment |
|---|---|---|
| FHA Loan | 580 | 3.5% |
| VA Loan | 620 | 0% |
| USDA Loan | 640 | 0% |
I don't have money for a down payment
Home Possible requires 3% down, but there are ways to get this money:
| Source | What They Offer | How to Apply |
|---|---|---|
| State housing agency | Grants up to $15,000 | Search "[Your State] down payment assistance" |
| Local housing authority | Forgivable loans | Call your city/county housing office |
| Employer benefits | $5,000-$10,000 grants | Ask HR about homebuyer benefits |
| Nonprofit housing organizations | Closing cost help | Search for local housing nonprofits in your area |
Alternative Sources for Down Payment
| Source | What You Need | How to Get It |
|---|---|---|
| Family gift | Gift letter from donor | Ask family for documented gift funds |
| 401(k) loan | Employer plan allows loans | Contact your 401(k) administrator |
| Sell items/work | Extra income or assets | Sell unused items, take side jobs |
| Tax refund | Tax filing completed | File taxes early, use refund for down payment |
Home Possible: Common Limiting Beliefs
"I need perfect credit to buy a home."
Home Possible requires a minimum credit score of 620 . While higher scores may help with rates, you don't need perfect credit to qualify.
"PMI will cost me thousands and never go away."
Home Possible PMI is typically more affordable than FHA insurance and can be removed once you build 20% equity in your home.
"Low-income buyers can't get conventional loans."
Home Possible was created specifically for low-to-moderate income borrowers, making conventional loans accessible to more people.
"I need 20% down payment to buy a home."
Home Possible requires just 3% down.
"Government loans have better rates than conventional."
Borrowers with good credit often find competitive rates on Home Possible, sometimes better than FHA options.
"Home buying takes months and months."
Home Possible loans typically close in 30-45 days, which is standard for most mortgage programs.
"I can't use gift money from my family."
Gift funds are accepted for Home Possible loans with proper documentation from your family.
"I make too much money to qualify for help."
Home Possible is designed for low-to-moderate income borrowers, with income limits based on your area's median income.
Explore More Home Possible Resources
- Credit Score Requirements
- Down Payment & Closing Costs
- AMI & Income Limits Lookup Tool
- Loan Requirements
- PMI Rules
