HOME READY VS HOME POSSIBLE,
WHICH IS THE BETTER OPTION FOR YOU?
HOME READY LOANS
A Home Ready mortgage is a home loan financed through Fannie Mae, (Federal National Mortgage Association). This loan is intended to better assist borrowers who have a lower credit score, lower income and are looking to own a home.'
Qualified buyers only need a 3% down payment. To compare, that is less than the 3.5% down payment minimum required for loans funded by the Federal Housing Administration (FHA).
Just like other conventional mortgages, if you put less than a 20% down payment on a Home Ready loan, you will pay for private mortgage insurance (PMI). PMI premiums however are reduced for those Home Ready-eligible borrowers. This helps keep the monthly payment lower than a standard conventional loan.
A few things to know about PMI:
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Your PMI premium varies based on your credit score and loan to value ratio
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Once your loan to value ratio reaches 80%, you can request to cancel your PMI
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There is an automated cancellation once you reach a 78% loan to value ratio
Home Ready loans are ideal for:
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First time home buyers
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Repeat buyers
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Someone who’s credit score is 620 or higher
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A buyer with limited cash for a down payment
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Buyers who earn a salary less than or equal to 80% of the area median income
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Someone who has supplemental income from a tenant
HOME READY LOANS CRITERIA
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A minimum credit score of 620
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Note that your income can be lower, but you need to exceed the credit score required in order to be eligible.
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You don’t own another property in the country
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You attend the homeowner education courses required
WHAT IS A HOME POSSIBLE LOAN?
A Home Possible mortgage is ideal for those with a low income but can afford a monthly mortgage payment and minimal down payment upfront. These mortgages are designed for buyers with a low income or first time home buyers. You however don’t have to be a first time home buyer to apply for this program.
HOME POSSIBLE ADVANTAGES:
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Own a home without having to put down a 20% down payment
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Apply sweat equity for up to the entire amount of the Home Possible down payment and closing costs
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Non-occupying co-borrowers can contribute to borrower funds on one-unit properties
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Cancel mortgage insurance upon reaching 20% equity which reduces your monthly mortgage payment. It also could save you thousands of dollars over the life of the loan.
Along with the small down payment requirement of 3%, Home Possible offers more options to responsibly increase homeownership for more of your borrowers. Co-borrowers who don’t actually live in the home can be included for a borrower’s one-unit residence, borrowers are permitted to have another financed property, and more –all with competitive pricing and the ease of a conventional mortgage.