Freddie Mac Guidelines: HomeOne® High-LTV Mortgages

What HomeOne Mortgages Offer

HomeOne mortgages give qualified borrowers access to high loan-to-value financing up to 97%. This means you can buy a home with as little as 3% down payment. The program targets first-time homebuyers but also allows refinancing in specific situations.

The program only accepts fixed-rate mortgages that receive an "Accept" recommendation from Fannie Mae's automated underwriting system, Loan Product Advisor. Your lender runs your application through this system, which evaluates your credit, income, assets, and debt to determine eligibility.

Say you want to buy a $400,000 home. With a HomeOne mortgage at 97% LTV, you could finance $388,000 and put down just $12,000. This makes homeownership accessible when saving for a traditional 20% down payment feels impossible.

Property and Occupancy Rules

HomeOne mortgages must secure single-family homes that you occupy as your primary residence. You cannot use this program for investment properties, vacation homes, or second homes. All borrowers on the loan must live in the property.

The property must be a single-unit home. Condos and townhomes qualify, but manufactured homes do not unless they meet CHOICEHome standards. Multi-unit properties like duplexes are not eligible.

If you buy a $350,000 condo and plan to rent out a room to help with mortgage payments, that works fine. But you cannot buy the condo as a rental property and use HomeOne financing.

First-Time Homebuyer Requirements

For purchase transactions, at least one borrower must qualify as a first-time homebuyer. Fannie Mae defines this as someone who has not owned a home in the past three years. If you owned a home five years ago but have been renting since then, you qualify as a first-time homebuyer.

This requirement only applies to purchases. If you currently own a home and want to refinance with HomeOne, the first-time homebuyer rule does not apply to refinance transactions.

When married couples apply together, only one spouse needs first-time homebuyer status. If your spouse owned a home two years ago but you have never owned property, you both qualify for HomeOne financing.

Refinancing with HomeOne

HomeOne allows "no cash-out" refinancing under specific conditions. The rules depend on your current loan-to-value ratio and who owns your existing mortgage.

If your current mortgage has an LTV above 95% or a total LTV above 95% with secondary financing, Fannie Mae must already own or have securitized your existing loan. This limits refinancing options for borrowers with high-LTV loans from other investors.

However, if your total LTV exceeds 95% because you have an Affordable Second mortgage, Fannie Mae does not need to own your primary mortgage. Affordable Seconds are specific down payment assistance programs that Fannie Mae recognizes.

A borrower with a 95% first mortgage and a 5% Affordable Second (100% total LTV) can refinance the first mortgage through HomeOne regardless of who currently owns it.

Maximum Loan-to-Value Ratios

Standard HomeOne mortgages allow up to 97% LTV. This applies whether you have just a first mortgage or a first mortgage combined with secondary financing.

The exception involves Affordable Second mortgages. When you combine a HomeOne first mortgage with an Affordable Second, the total LTV can reach 105%. This means you could potentially finance more than the home's value if you qualify for specific down payment assistance programs.

Your lender calculates LTV by dividing the loan amount by the home's appraised value or purchase price, whichever is lower. A $300,000 home with a $291,000 mortgage has a 97% LTV.

Credit and Underwriting Standards

At least one borrower must have a usable credit score as determined by Loan Product Advisor. The system evaluates credit scores from all three bureaus and determines which scores it can use for underwriting.

Fannie Mae does not publish minimum credit score requirements for HomeOne mortgages, but lenders typically require scores of 620 or higher. The automated underwriting system considers your entire credit profile, not just the score.

Your debt-to-income ratio, employment history, and asset reserves all factor into the underwriting decision. HomeOne mortgages follow standard Fannie Mae guidelines for income verification and asset documentation [[B3-3.1-01]].

Homeownership Education Requirements

When all borrowers qualify as first-time homebuyers, at least one person must complete homeownership education. This requirement applies only to purchase transactions, not refinances.

The education program must meet Fannie Mae standards outlined in Section 5103.4. Many nonprofit organizations, housing agencies, and online providers offer approved courses. The education typically covers budgeting, mortgage basics, home maintenance, and avoiding foreclosure.

If one borrower is a first-time homebuyer but the other has owned property before, the education requirement may not apply. Check with your lender about specific situations.

What Loans Don't Qualify

Several mortgage types cannot use HomeOne financing. Government loans like FHA, VA, and USDA mortgages have their own high-LTV programs and cannot be HomeOne mortgages.

Other Fannie Mae programs like Home Possible and HeritageOne have different eligibility rules and cannot be combined with HomeOne benefits. Jumbo loans that exceed conforming loan limits also cannot use HomeOne financing.

Mortgages with financed permanent buydowns, where the seller pays to reduce your interest rate, are not eligible. The program also excludes loans with capitalized balances or certain modification features.

Common Complications

Income documentation follows standard Fannie Mae rules, which can complicate approval for self-employed borrowers or those with variable income. Commission-based workers need two years of tax returns and may face additional scrutiny if earnings declined recently.

Property appraisals become critical at high LTV ratios. If the home appraises below the purchase price, you may need to increase your down payment or renegotiate the price to maintain 97% financing.

Private mortgage insurance is required for all HomeOne mortgages since they exceed 80% LTV. This adds to your monthly payment but can be removed once you reach 78% LTV through payments and appreciation.

Some lenders may not offer HomeOne mortgages or may have additional requirements beyond Fannie Mae's guidelines. Shop with multiple lenders to find the best terms and ensure program availability.

References

For the official guidelines, see 4605.1: HomeOne® Mortgages in the Fannie Mae Selling Guide.