In today’s mortgage market borrowers have numerous loan programs to choose from. In this article we will discuss two loan programs and how they are similar, how they are different and how to choose which one better suits you. Choosing the right home, home loan, and lender will all help to save you thousands of dollars.
FHA vs HomeReady
The FHA program is commonly described as a mortgage program that is backed by the Government and is available only through FHA-Approved lenders. The FHA program has always been directed towards first-time homebuyers or low-income families but anyone can apply for an FHA home loan. One of the most favorable benefits to the FHA home loan is, the FHA offers low down payment rates at only 3.5%.
The HomeReady program, on the other hand, is a mortgage program offered by Fannie Mae and is available through various lenders. The HomeReady program was designed for those individuals who have limited income and also offers a low down payment rate of 3%. The HomeReady program allows interested borrowers to include other income sources, from non-borrowers, such as parents or other relatives. The extra income can help a borrower to qualify not only for a home loan but for a higher home loan amount.
Similarities VS Differences
While the FHA Program and HomeReady Program are different they do still have some similarities, these similarities are described below.
- The HomeReady and FHA mortgage programs are both well suited for first time home buyers.
- While both mortgage programs are offered by traditional mortgage lenders, not every lender will offer the programs.
- Both mortgage programs can be used by home buyers with low to moderate incomes and borrowers who have bad credit profiles.
- These programs also allow borrowers to buy their home with a low down payment and offer down payment assistance to qualified borrowers.
- Both loan programs have limits on the mortgage amount.
- Both mortgage programs also require the borrower to pay additional insurance fees with their monthly mortgage payment.
- The FHA requires borrowers to pay MIP while the HomeReady program requires borrowers to pay PMI.
While both programs have similarities they also have some difference, like;
- The total interest rate for the HomeReady program is usually higher than the FHA program.
- The FHA also requires the borrower to pay their MIP up front in addition to the monthly fee.
- The HomeReady program doesn’t require the insurance to be paid up front but does require the borrower to pay for insurance.
- Depending on your location, the HomeReady program has income limits while the FHA doesn’t.
- While the HomeReady and FHA programs both offer low down payment of only 3%, that is true for a borrower who has a minimum credit score of 680 and depends on the borrower’s debt to income ratio.
- Borrowers with lower credit score can still qualify to use the HomeReady program but are usually required to make a higher down payment.
Each borrower’s situation will vary, it’s best to contact your lender and discuss your options and find what works best for you.
It’s very important that you shop around for the best rates and fees no matter what program you choose to use. Ask lenders many questions and get a free quote from them and then compare to find the best rate to fit your needs. Keep in mind that the quoted rate may not be the exact rate you end up with. Find a lender who is has a strong track record of funding the program you’re interested in using. The more knowledgeable your lender is about the specific program the easier the loan process will be since they will know all the ins and outs to the loan. Click below to start your lender search, it’s quick, easy and it’s free.