Freddie Mac Announces $2500 Credit for Low Income Homebuyers
Freddie Mac has announced that they are making a $2500 credit available to potential homebuyers who earn 50% or less of the median income for their area. This credit is available to help with down payments, closing costs and other expenses.
As home prices have climbed alongside interest rates, many would-be buyers have been completely left out of the housing market. This is especially true for low income earners where sometimes just the cost of getting into a home is prohibitive.
Freddie Mac Home Credit Explained
Starting March 1, 2024, borrowers who earn no more than 50% of the median income for their area will be eligible to apply for the $2500 credit. The credit can be used to cover closing costs, down payments, escrow fees, and mortgage insurance premiums. The credit is being made available through Freddie Mac's Home Possible® program as well as their HFA Advantage program. Per these programs, certain qualifications must be met in order to obtain the credit.
Freddie says they financed approximately 800,000 homes last year, and first time homebuyers made up about 51% of those loans. SVP and head of Single-Family Acquisitions at Freddie Mac, Sonu Mittal, says that "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."
Practicality of the $2500 Credit
In considering this new credit, I started to wonder how many people could actually benefit from it. After all, if someone is earning 50% of the area median income of my area, that would be $51,350 according to Freddie Mac's area median income tool. It begs the question, how much home could I actually qualify for if I earned $51,350?
To find the answer, I reached out to Brent Aldridge with American National Bank in Mansfield.
Let's assume that I have no other outstanding debt and that my credit score is somewhere in the 650-700 range. Let's also assume that I plan to put 3% down on the home and that I qualify for a loan with 6.5% interest. With these assumptions, the maximum price I would be shopping for would be around $225,000.
Is it even possible to find a home in south Arlington or Mansfield for $225,000? I did a search in the MLS for current active listings in this area for $225,000 or less. Right now there are only three active listings, and two of them are half-duplexes! Definitely not much to choose from in that price range.
So, who could this credit help? Like anything else, it is going to depend on the area in which a buyer is looking. There are going to be some areas that have a few more homes that would be available to a buyer in this situation. And, Aldridge says it would have to be a person who has no debt and has managed their finances well for a number of years. "Occasionally I run into someone who has a little savings built up and who has never accrued much debt. Even though they may have low income, we can utilize a program like this to get them into a home," says Aldridge.
Conclusion
Freddie Mac's new $2500 credit for low income earners is not going to help a ton of would-be homebuyers out there, but there are some who can benefit from this credit. Again, to qualify, you must earn no more than 50% of your area median income, and you can use the credit to help with a down payment and closing costs of the transaction. If you have managed your finances well, you have a decent credit score, and you have little or no debt, this program might be for you. If you think you might benefit from this program, I encourage you to call your lender today to find out if you qualify!
Do you need a lender? You can reach Brent Aldridge at American National Bank at brentaldridge@anbtx.com. Do you need a real estate agent? You can reach me at lee@harbaughbrothers.com or 817.881.4768.