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HomeOne: a 3% Down Payment Option for California First-Time Buyers

In this article: an overview of Freddie Mac’s HomeOne® mortgage product that allows California first-time home buyers to make a down payment of 3% on a purchase.

First-time home buyers in California often have a hard time saving up enough money for the minimum down payment on a standard mortgage. It’s easy to understand why, considering that the statewide median home value is now above $800,000.

Fortunately, there are several programs that offer a low down payment option for first-time home buyers in California. And today, we will explore one such program that’s being offered by Freddie Mac.

Meet Freddie Mac’s “HomeOne” Mortgage

Freddie Mac is one of the two government-sponsored enterprises (GSEs) that purchase home loans from lenders. Fannie Mae is the other.

By purchasing loans, these corporations inject liquidity into the mortgage market so that lenders can make more loans. This benefits home buyers by increasing the amount of mortgage financing that’s available in the private sector.

Freddie and Fannie also offer certain mortgage programs that are specifically designed to help first-time buyers in California and elsewhere across the U.S.

Freddie Mac, for example offers a program known as the HomeOne mortgage. This program can help first-time buyers in California purchase a home with a low down payment of just 3%. And by doing so, it greatly reduces one of the biggest hurdles to homeownership.

Here’s how they describe this product in a fact sheet for mortgage lenders:

First-time homebuyers make up nearly half of all home purchases, yet saving for a down payment is this segment’s biggest barrier to homeownership. We’re going all in to help you close this gap and qualify more first time homebuyers with the HomeOne 3% down payment solution.

A 3% Down Payment for California Home Buyers

California has some of the highest home prices in the nation, especially in coastal real estate markets like Los Angeles and the San Francisco Bay Area. As a result, many first-time home buyers in California have a hard time coming up with the down payment needed for a traditional mortgage loan.

By offering a 3% down payment option for California first-time buyers, Freddie Mac’s HomeOne mortgage can make homeownership a much more achievable goal.

Here are some frequently asked questions about this low down payment mortgage product:

1. Who is eligible for these mortgage loans?

For purchase loans, at least one of the borrowers associated with the mortgage loan must be a first-time home buyer. But Freddie Mac has a specific definition of “first-time buyer” that makes this product available to a fairly broad audience.

In fact, you could qualify for this program even if you have owned a home in the past, as long as you meet a three-year requirement.

Within the context of their HomeOne mortgage product, Freddie Mac defines a first-time home buyer as someone who has “had no ownership interest (sole or joint) in a residential property during the three year period preceding the date of the purchase of the mortgaged premises.”

Additionally, the home buyer must plan to reside in the home being purchased. In other words, you cannot use this low down 3% down payment program to purchase a vacation or investment home. You must live in the house as your primary residence.

2. What type of home can I buy?

First time home buyers in California can use the 3% down payment option from Freddie Mac to purchase almost any type of 1-unit primary residence. This includes detached single-family homes, townhouses and condos. But manufactured homes are not eligible for this particular mortgage program.

3. What credit score do I need to qualify?

Unlike other financing programs that offer 3% down payments for first-time buyers in California, Freddie Mac’s HomeOne product does not have a minimum credit score requirement. But the mortgage lender offering the loan can impose their own credit guidelines, so this can vary from one lender to the next.

4. How much can I borrow through this program?

Generally speaking, it’s up to the mortgage lender to determine how much you are able to borrow. Your lender will review your current income and debt situation to make this determination.

Additionally, the 3% down payment mortgage for first-time buyers only applies to conforming loans that fall within a certain size range. So-called “super conforming” loans that are commonly used in high-cost areas are not eligible for the Freddie Mac HomeOne program.

Because of this restriction, California first-time home buyers purchasing high-end properties might not be able to use this particular program. But there are jumbo loan options available for such borrowers—and we offer those as well.

5. What are the benefits for first-time buyers?

This program’s biggest benefit is something we touched on already. A first-time buyer in California could make a down payment as low as 3% when using a HomeOne mortgage.

By reducing the amount of money that’s needed up front, this program can help first-time home buyers make a purchase sooner rather than later. It could shave years off of the timeline, shortening the path to homeownership.

The 3% down payment option associated with this program also frees up cash for other purchase-related expenses, such as closing costs and moving fees.

This program also offers competitive mortgage rates for borrowers. In fact, first-time home buyers in California who use the HomeOne program typically qualify for below-market interest rates. This in turn could lead to a smaller monthly payment.

Additionally, there are no income or geographic restrictions associated with this program. The Freddie Mac 3% down payment mortgage is available to all eligible first-time buyers in California, regardless of where they live in the state.

6. What is the education requirement for this program?

In a typical purchase scenario, some home buyers who use the HomeOne program will have to undergo homeownership education prior to closing.

As it states on the Freddie Mac website: “if all occupying borrowers are first-time homebuyers, at least one occupying borrower must receive homeownership education.”

There are a number of organizations that offer this kind of homeownership education. It can be provided by any HUD-approved counseling agency, mortgage insurer, housing finance agency, or Community Development Financial Institution (CDFIs).

Home buyers can also use any education program that meets the National Industry Standards for Homeownership Education and Counseling.

We Can Help You Apply for a Loan

If you’re a first-time home buyer in California seeking a 3% down payment mortgage option, please contact our knowledgeable staff. As a licensed California mortgage broker, we can answer any questions you have about the Freddie Mac HomeOne program and help you apply for a loan.

Bridgepoint Funding has been helping California first-time buyers for nearly 20 years. We have access to a wide range of financing options, including the 3% down payment program mentioned above.

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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