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First-time homebuyers may benefit from new program


Clark Howard Staff

Getting into a house is about to get easier for a first-time homebuyer thanks to moves by Freddie Mac.

Are these lending standards too lax?

As one of the nation’s largest mortgage purchasers, Freddie Mac is like a clearinghouse for lenders, along with its direct competitor Fannie Mae.

Freddie Mac says it buys one in four mortgages originated by U.S. lenders when they sell their loans instead of holding them in portfolio. That’s what makes it such a huge player in the mortgage business.

So you have to wonder what the outcome of Freddie Mac’s latest experiment is going to be…

According to the Wall Street Journal, Freddie Mac is loosening its lending standards as part of a 12-month pilot program that aims to serve the low-income and Hispanic market.

One of the biggest initiatives of the new program will be one that acknowledges non-traditional and multi-generational trends in housing. As part of the qualification process, borrowers will be permitted under the program to use the income of people who live with them but won’t be on the mortgage.

In addition, the new program acknowledges that many low-income borrowers may hold a second job. So mortgage applicants will now only have to demonstrate income from that second job for the last 12 months, which is down from the previous requirement of 24 months of proof.

Finally, Freddie Mac understands many of the borrowers it is targeting may be part of the “unbanked” segment of the U.S. population. Therefore, there’s no requirement for bank statements that would show a paper trail of how applicants came by their down payment.

And therein lies an important point. While you now know what the new program is doing, here’s what it’s not doing—lowering down payment or credit score requirements!

That last part is very key because being lax on those latter two requirement is what got us into trouble with the recent housing meltdown!

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