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Mortgage giants Fannie Mae and Freddie Mac will help very low income borrowers qualify for a loan by providing a $2,500 credit that they can put toward their down payment, closing costs, escrow or mortgage insurance premiums.

Freddie Mac will offer the credit to homebuyers who qualify for its Home Possible mortgage, which lets buyers put down as little as 3 percent and through its HFA Advantage mortgage for housing finance agencies (HFAs).

The offer is available on mortgages with settlement dates from Mar. 1, 2024, through Feb. 28, 2025, Freddie Mac said in a lender bulletin Monday.

Fannie Mae’s credit will be offered on HomeReady mortgages — Fannie’s 3 percent down loan — on a similar time frame.

In announcing the credit, Freddie Mac said it financed 800,000 home purchases last year, and that 51 percent of those loans went to first-time homebuyers — the highest share in more than three decades of records.

Sonu Mittal

“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,” Freddie Mac executive Sonu Mittal said, in a statement. “We look forward to announcing additional ways to support low-income borrowers in the months ahead.”

If there’s a catch, it’s that very low-income families are defined as those earning 50 percent of the area median income or less, so many homebuyers won’t qualify.

In Indianapolis, Indiana, for example, the area median income in Marion County is $97,300. So a single-person household’s income could not exceed $48,650. In pricier McLean, Virginia — where Freddie Mac is headquartered — the median income in Fairfax County is $150,400, so a prospective homebuyer could earn up to $75,200 and still qualify.

Would-be homebuyers who don’t qualify as very low income may still be able to take advantage of other programs designed to lower the barriers to homeownership.

Down Payment Resource, an Atlanta-based technology provider, tracks assistance programs available through federal, state, county or local government agencies that can be accessed through integrations with multiple listing services (MLSs), lenders and agents. Freddie Mac offers a similar tool for lenders, DPA One, that lets loan officers enter client eligibility parameters and receive information about down payment assistance programs.

Lenders like Rocket Mortgage, United Wholesale Mortgage and Zillow are providing grants so that buyers only need to come up with a 1 percent down payment to take out a HomeReady or Home Possible loan. Rocket sweetens the deal by also picking up the cost of PMI.

LoanDepot offers second mortgages to help would-be homebuyers who can’t come up with the 3.5 percent minimum down payment required to qualify for FHA purchase mortgages.

Another option for borrowers who need help with a down payment are Special Purpose Credit Programs (SPCPs) offered by a growing number of lenders to borrowers in underserved areas who might otherwise be denied credit or offered less favorable terms.
Lenders that offer mortgages through SPCPs include:

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