Freddie Mac adds option for closing costs, down payments in rural areas
Freddie Mac is expanding its Home Possible loan program to allow borrowers in rural locations to use "sweat equity" for down payments and closing expenses.
Construction work or investment in related materials can be used to cover up to the full amount of the down payment, "provided the labor performed is completed in a skillful manner to support the appraised value," according to Freddie Mac. An appraiser must certify the value of the work.
The new offering is an expansion of Freddie's Home Possible low down payment loan program, and part of the government-sponsored enterprise's plan to fulfill its "duty to serve" legislative mandate. Duty to serve directs the GSEs to address challenges like affordable housing preservation and underserved markets such as rural areas.
"More than 61 million Americans live, work and raise families in rural areas and other historically underserved communities," Mike Dawson, vice president of single-family affordable lending strategy and policy at Freddie Mac, said in a press release.
"In rural America, many creditworthy families with low-to-moderate incomes face significant barriers to homeownership, especially obtaining the down payment," he added. "This offering will help them use their own construction skills to make up that difference increasing the pool of mortgage-ready customers."
Most rural Americans consider their local economy to be fair or poor, according to a recent study by the Robert Wood Johnson Foundation.
Areas where Freddie Mac is working with local organizations to extend educational outreach about the option to residents include Middle Appalachia, the Lower Mississippi Delta, colonias along the Mexican border and Native Americans in Indian reservation areas.
Organizations Freddie Mac is working with include the Federation of Appalachian Housing Enterprises, Home Enterprise Corp., Homeownership Education Resources Organization, Enterprise Community Partners, Community Development Corp. of Brownsville, Next Steps and Next Job.