Freddie Mac Single-Family Seller/Servicer Guide §4601.1 — Financed Permanent Buydown Mortgages (07/02/25)
Freddie Mac Guide §4601.1 (Financed Permanent Buydown Mortgages). Gap-fill (verbatim, ID-diff).
Verbatim regulatory text
Verbatim provisions from Freddie Mac Single-Family Seller/Servicer Guide §4601.1 — Financed Permanent Buydown Mortgages (07/02/25) — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
Freddie Mac Guide 4601.1
(07/02/25) A Financed Permanent Buydown Mortgage is a Mortgage for which the Borrower has permanently reduced the interest rate by financing discount points in the loan amount. This section contains requirements related to: ■ Eligible Financed Permanent Buydown Mortgages ■ Ineligible Financed Permanent Buydown Mortgages ■ Underwriting Financed Permanent Buydown Mortgages ■ Calculation of applicable Credit Fees for Financed Permanent Buydown Mortgages (a) Eligible Financed Permanent Buydown Mortgages The Mortgage must be an eligible fixed-rate, level-payment Mortgage or a 5/6-Month, 7/6- Month or 10/6-Month ARM. (b) Ineligible Financed Permanent Buydown Mortgages Financed Permanent Buydown Mortgages must not be: ■ Community Land Trust Mortgages ■ Government Mortgages ■ HeritageOne® Mortgages ■ Home Possible® Mortgages ■ HomeOne® Mortgages ■ Mortgages with a temporary subsidy buydown ■ Secured by property subject to income-based resale restrictions that terminate upon foreclosure (or expiration of any applicable legally required foreclosure redemption
Freddie Mac Guide 4601.1
601-2 period) or recordation of a deed-in-lieu of foreclosure, where the property value must be determined in accordance with Section 4406.4(c) (c) Underwriting Financed Permanent Buydown Mortgages For purposes of this chapter, the following definitions apply: Defined terms for Financed Permanent Buydown Mortgages B Base Mortgage Amount The Mortgage amount without the financed discount points G Gross loan-to-value (LTV), total LTV (TLTV) and Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios The LTV, TLTV or HTLTV ratio calculated using the Mortgage amount, which includes the financed discount points Eligibility of Financed Permanent Buydown Mortgages is determined using the Gross LTV, TLTV and HTLTV ratios. Financed Permanent Buydown Mortgages must comply with the following requirements: 1. The Gross LTV, TLTV and HTLTV ratios must not exceed the LTV, TLTV or HTLTV ratios specified in Section 4203.1(b) 2. The amount of the mortgage insurance coverage must meet the coverage level requirements in Section 4701.1, using the Gross LTV ratio 3. The maximum amount a Borrower can finance for a permanent buydown is three discount points, calculated based upon the Base Mortgage Amount 4. For fixed-rate Mortgages, Borrower qualification is based on the monthly housing expense-to-income ratio calculated using the monthly payment at the permanent bought down Note Rate. For ARMs, Borrower qualification is based on monthly payments calculated in accordance with Section 4401.2. 5. For ARMs, the permanent buydown is in effect for the initial Note Rate and each Note Rate adjustment for the entire term of the Mortgage. The Lifetime Ceiling will be calculated using the permanent bought down initial Note Rate. The permanent buydown does not affect the Margin, Initial Cap or Periodic Cap.
Freddie Mac Guide 4601.1
601-3 (d) Calculation of applicable Credit Fees for Financed Permanent Buydown Mortgages Applicable Credit Fees will be assessed and billed based on the UPB of the Mortgage (including the financed permanent buydown points) and the Gross LTV ratio. The Seller must refer to Exhibit 19, Credit Fees. Credit Fees are paid in accordance with the Credit Fee provisions stated in Chapter 6303.
Freddie Mac Guide 4601.1
602-1 Chapter 4602: Construction to Permanent Mortgages and Renovation Mortgages
Freddie Mac Guide 4601.1
Construction to Permanent Mortgages and Renovation Mortgages (02/04/26) Refer to Bulletin 2025-7, which announced the policy requirements for Uniform Appraisal Dataset (UAD) 3.6. Sellers may submit to the Uniform Collateral Data Portal® appraisal reports that use UAD 3.6 before the mandatory effective November 2, 2026 version of this section. The requirements of this section apply to all Construction to Permanent Mortgages and Renovation Mortgages. Additionally, One-Time Close transactions must meet the requirements in 4602.2 and Two-Time Close transactions must meet the requirements in Section 4602.3. This section contains requirements related to: ■ Eligible Mortgages ■ Ineligible Mortgages ■ Eligible use of Interim Construction Financing proceeds ■ Permanent Financing proceeds ■ Eligible property ■ Borrower eligibility ■ Completion status of the Mortgaged Premises ■ Mortgage file documentation ■ Seller-Owned Modified Mortgages and Seller-Owned Converted Mortgages ■ Credit Fees (a) Eligible Mortgages Mortgages must be First Lien Mortgages and may be any Mortgage Product or offering eligible under the Guide unless specifically described as ineligible in this section. (b) Ineligible Mortgages
Freddie Mac Guide 4601.1
602-2 The following Mortgages are ineligible as Construction to Permanent Mortgages and Renovation Mortgages: ■ Community Land Trust Mortgages ■ Government Mortgages ■ Mortgages secured by properties subject to income-based resale restrictions ■ Special purpose cash-out refinance Mortgages (c) Eligible use of Interim Construction Financing proceeds For purchase transaction Mortgages, the proceeds of the Interim Construction Financing may be used as described in the table below: Eligible use of Interim Construction Financing proceeds Purchase transaction Construction to Permanent Mortgage Renovation Mortgage ■ Purchase the land or acquire a leasehold interest in the land ■ Pay construction costs of the site-built home or Manufactured Home ■ Pay costs for site preparation, including the removal of an existing Manufactured Home ■ For Mortgages secured by Manufactured Homes, acquire the Manufactured Home and pay construction costs, including costs to affix the Manufactured Home to a permanent foundation ■ Purchase the site-built home ■ Pay renovation costs of the site-built home For refinance Mortgages, the proceeds of the Interim Construction Financing may be used as described in the table below:
Freddie Mac Guide 4601.1
602-3 Eligible use of Interim Construction Financing proceeds Refinance transaction Construction to Permanent Mortgage Renovation Mortgage ■ Pay off any existing liens on the land ■ Pay construction costs of the site- built home or Manufactured Home ■ Pay costs for site preparation, including the removal of an existing Manufactured Home ■ For Mortgages secured by Manufactured Homes, acquire the Manufactured Home and pay construction costs, including costs to affix the Manufactured Home to a permanent foundation ■ Pay all Closing Costs ■ Pay off any existing liens on the land and on the improvements ■ Pay renovation costs of the site-built home ■ Pay all Closing Costs (d) Permanent Financing proceeds Permanent Financing proceeds are used to replace Interim Construction Financing after construction or renovations are complete and must not be used for the purpose of making a single disbursement of funds to a builder or contractor or for the assumption of an existing Mortgage. (e) Eligible property A Construction to Permanent Mortgage must be secured by: ■ A newly built or constructed 1- to 4-unit site-built home, or ■ A newly purchased Manufactured Home that has never been attached to a foundation A Renovation Mortgage must be secured by an existing 1-to 4-unit site-built home. Prior to the start of construction or renovation work, the Borrower must own the land or Mortgaged Premises in fee simple or have a leasehold estate meeting the requirements of Chapter 5704. The Borrower may have acquired the land through a purchase, inheritance, gift or legal award in accordance with a final judgment or decision from a legal body (e.g., court, jury, judge or arbitrator) such as in a case of divorce, separation or dissolution of a domestic partnership.
Freddie Mac Guide 4601.1
602-4 (f) Borrower eligibility The Borrower on the Permanent Financing must be the Borrower on, and obligated to repay, the Interim Construction Financing, and any other outstanding prior financing, including installation financing or outstanding prior Mortgages. Exceptions: ■ A Borrower may be omitted in the event of death or divorce ■ A Borrower who is a Related Person may be added, provided that all Borrowers on the Permanent Financing are owner-occupants of the Mortgaged Premises and considered in the underwriting of the Permanent Financing The builder/developer must not be obligated to repay the Interim Construction Financing or any Mortgage on the land or the improvements except when the builder/developer is the Borrower on the Permanent Financing and will occupy the Mortgaged Premises as their Primary Residence. (g) Completion status of the Mortgaged Premises All improvements to the Mortgaged Premises must be fully completed before the Settlement Date, except for Mortgages secured by site-built homes meeting the requirements in Section 5601.3. For Manufactured Homes, the installation must be fully complete, including permanent utility connections and construction of any site-built improvements such as garages, decks, or porches, before the Settlement Date as evidenced by a satisfactory completion report. For both site-built homes and Manufactured Homes, the Seller must obtain a completion report in accordance with the requirements in Section 5605.8. (h) Mortgage file documentation For Construction to Permanent Mortgages and Renovation Mortgages, the Mortgage file must include: ■ Documentation that supports classification of the Mortgage as a Construction to Permanent Mortgage or a Renovation Mortgage ■ Sufficient documentation (e.g., purchase contracts, plans and specifications, receipts, invoices, lien waivers) on which to validate the actual cost to construct or renovate the home ■ A document that clearly shows the Seller’s calculation of the purchase price and/or cost to construct
Freddie Mac Guide 4601.1
602-5 ■ The Settlement/Closing Disclosure Statement or an alternative form required by law evidencing all costs to homebuyer and property seller for the Interim Construction Financing ■ The Settlement/Closing Disclosure Statement for the Permanent Financing ■ For a Mortgage secured by a Manufactured Home, the manufacturer’s invoice and the Manufactured Home Purchase Agreement (i) Seller-Owned Modified Mortgages and Seller-Owned Converted Mortgages Seller-Owned Modified Mortgages and Seller-Owned Converted Mortgages (as described in Chapter 4402) may not be used to modify or convert Interim Construction Financing to Permanent Financing. After the Effective Date of Permanent Financing, if the terms of the Permanent Financing have been modified or if an ARM converted to a fixed-rate Mortgage, the resulting Mortgage is a Seller-Owned Modified Mortgage or Seller-Owned Converted Mortgage, as applicable, and must meet the requirements of Chapter 4402 and other provisions related to these Mortgages. (j) Credit Fees The Seller must refer to Exhibit 19, Credit Fees, for Credit Fees related to Construction to Permanent Mortgages and Renovation Mortgages. Credit Fees are paid in accordance with the Credit Fee provisions stated in Chapter 6303.
Freddie Mac Guide 4601.1
Construction to Permanent Mortgages and Renovation Mortgages (Future effective date 11/02/26) The requirements of this section apply to all Construction to Permanent Mortgages and Renovation Mortgages. Additionally, One-Time Close transactions must meet the requirements in 4602.2 and Two-Time Close transactions must meet the requirements in Section 4602.3. This section contains requirements related to: ■ Eligible Mortgages ■ Ineligible Mortgages ■ Eligible use of Interim Construction Financing proceeds ■ Permanent Financing proceeds