Match My Down Payment - Equity/Profit Share Program by Freddie Mac

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,003
155
63
San Diego, California
www.loansreduced.com
Freddie Mac just recently launched a new program that assists in down payment for an equity share in the future when the homeowner decides to sell. What we have been seeing typically is an equal investment from both the buyer and Unison. Buyer will put 10% down and Unison will put 10% down. This avoids having mortgage insurance and additionally makes your payment more affordable because you’re only paying on a loan at 80% loan to value instead of 90% with mortgage insurance.

Here is a video explaining it as well:

With the real estate market coming to a slowdown in certain areas where home values have peaked, this can be beneficial in many cases and a loan that should be considered when determining what is best for you and your family. Below I will explain an example of a traditional loan vs a Unison to help understand how this can benefit.

Loan Scenario: 500,000 Purchase, 50K down, Single Family home, Owner Occupied, FICO 700

Conventional 10% Down:
Loan Amount: 450,000.00
Estimated Interest Rate: 5.25
Monthly Payment (P&I): 2485.00
Mortgage Insurance: 206.25
*Not including Taxes and Insurance as they can vary state by state*
Total Payment (w/o taxes and insurance): 2691.25

*10% Borrower, 10% Unison (total of 20% down) Equity Sharing Program*
Loan Amount: 450,000.00
Unison Assistance: 50,000.00
Final Loan Amount: 400,000.00
Interest Rate: 5.5
Monthly Payment: 2271.00

As you can see the payment difference is quite significant at exactly 420.00 per month. In many cases that can make or break what someone is willing to afford as a mortgage payment. Now that we have gone over the difference between the similar loans with the exact down payment from the borrower, let’s go over details about the equity sharing portion of the loan as well as eligibility requirements:

Equity Sharing: How does that work?
In return for providing an initial investment up front, when the homebuyer sells, Unison receives their original investment +/- a specified equity share of the change in the home’s value (UP OR DOWN). The equity sharing is maxed out at 50% (usually 35% on residential transactions, 45% on new builds) and Unison will not take any additional funds.

An important fact to understand is that the HomeBuyer Agreement is based on equity sharing; however, they do not share in additional equity built over time by the borrower paying down their mortgage. In addition, Unison does not share in additional equity created by the borrower remodeling their home.

I have vetted through this program with my financial adviser as well as my CPA and we all agree that it is a great/beneficial program for many reasons. We've put together a few of the benefits below:

Benefits of using an Equity Share/Profit Share loan:
  • Monthly mortgage payment will be less and will not include mortgage insurance
  • Interest rate will likely be lower because there is a lower loan to value (increasing the down payment)
  • Your offer will be stronger showing a 20% down payment conventional loan instead of a 10%
  • You never have to sell the home if you don't want to, the profit sharing is a 30 year note.
  • There is NO monthly payment on the amount given to you in down payment match
  • The way the equity sharing has been designed ultimately benefits all parties involved as partners

We have also seen situations where a borrower wants to get into a home that they love but may not necessarily be able to afford now be able to do that. I recently worked with a Doctor completing her residency and once her residency was complete her income was going to go from 80,000/yr to 350,000/yr but she didn't want to wait to get that perfect house. We were able to accomplish it with this program and once she gets her increase in pay, she mentioned that she's going to pay off the portion she received and will no longer have an obligation to share the profit/equity in the home in the future.

There are so many different scenarios that this can work for, it's honestly endless. You want to chat with a professional that can go over different options based on your long term goals to help you understand which is best for you and your family. Below we will go over eligibility requirements on this program.

Buyer Eligibility Requirements:
  • 680 FICO
  • 10% Down Payment Required (5% must come from borrowers own funds)
  • Maximum DTI is 45%
  • Primary Residence Only
  • Purchase Program Only
  • Foreclosure 7 years, Bankruptcy, deed-in-lieu and Short Sale must have 5 years seasoned. Borrowers who are between 5-7 years on the BK, SS, DIL will require an exception by Unison.

Property Requirements:
  • Manufactured homes are not eligible
  • Property must always be Pre-qualified by Unison before the borrower/buyer makes an offer. What I typically suggest is having myself or the loan officer you’re working with familiar with this program reach out to the agent to let them know what is needed before going into contract.
  • Single Family, Condos, Townhouses and PUD’s are eligible property types
  • Appraisal is required

Current State Availability:
West Coast: WA, OR, CA, CO, NV, AZ
Midwest: IL, MI, MN, MO, OH
East Coast: MA, CT, NJ, NY, PA
Mid-Atlantic: MD, DC, DE, VA
Southeast: NC, FL, GA

These states are getting updated and if you do not live in one of the above states please call and check to see if your state has been added.

If you would like to know more about this equity sharing program that has just been released by Freddie Mac as of August 21st, 2018 please don’t hesitate to reach out to myself or my team at 619-379-8999 or [email protected]. You can also Apply Online by Clicking Here.
 
Last edited:

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,003
155
63
San Diego, California
www.loansreduced.com
**02/04/2019 - This program has recently been discontinued and the last loans must be delivered to Freddie Mac by July, 2019. We believe it is due to Freddie Mac having to manually input these loans into their system causing additional work on their side. Once that is resolved the program may open back up, until then - JUMBO (above conforming limits) are still available**