HomeReady vs HomePossible

HomeReady vs. HomePossible: Which Mortgage is Right for You?

If you’re a first-time homebuyer or looking for a low down payment option, Fannie Mae’s HomeReady and Freddie Mac’s HomePossible programs offer attractive features designed to expand access to homeownership. In this post, we break down the similarities and differences—based on official guidelines—to help you decide which program fits your financial profile.

Overview of HomeReady and HomePossible Mortgages

Both programs aim to serve borrowers who might not qualify for a traditional mortgage by offering flexible underwriting and low down payment options.

What is the HomeReady Mortgage?

Developed by Fannie Mae, HomeReady is geared toward low-to-moderate income borrowers. Key features include:

Low Down Payment: As little as 3% down, with the option to use gift funds, grants, or community assistance for the entire amount.
Flexible Income Use: Eligible borrowers can include household member income—even if that person isn’t on the loan—to help qualify.
Homebuyer Education: A homeownership education course is required for first-time buyers or those meeting certain income thresholds.

What is the HomePossible Mortgage?

Offered by Freddie Mac, HomePossible provides similar benefits with its own flexible guidelines:

Low Down Payment: Also a 3% minimum down payment, with the ability to use funds from gifts or grants.
Non-Occupant Co-Borrowers: In addition to traditional income, borrowers can include a non-occupant co-borrower to strengthen their application.
Homebuyer Education: Required only when all borrowers are first-time homebuyers, ensuring support without overburdening experienced buyers.

Key Similarities

Both HomeReady and HomePossible share several core features:

3% Down Payment: Each program allows a minimum down payment of 3%, making homeownership more accessible.
Income Limits: Eligibility is subject to area median income guidelines (with some flexibility in high-cost areas).
Gift Funds Allowed: Down payment funds can come entirely from approved gifts, grants, or community assistance.
Primary Residences Only: Both programs require that the property be used as a primary residence.
Credit Guidelines: Generally, both programs consider borrowers with credit scores starting around 620 (though individual lenders may apply additional overlays).

Key Differences

While the programs are similar in many ways, a few differences can help you decide which one suits your situation best:

Income Qualification

HomeReady: Permits the use of non-borrower household member income. This can be especially beneficial if family members help support your overall income picture.
HomePossible: Allows the inclusion of non-occupant co-borrowers. This option lets someone who doesn’t live in the home contribute to the mortgage qualification process.

Homebuyer Education Requirements

HomeReady: Requires completion of an approved homebuyer education course for first-time buyers or those below specified income thresholds.
HomePossible: Requires homebuyer education only if every borrower is a first-time homebuyer, offering more flexibility if you’ve owned a home before.

Documentation Nuances

While both programs allow for a 3% down payment from eligible sources, subtle differences in documentation and underwriting may exist. Always consult your lender to understand how these nuances might affect your application.

Pros and Cons

HomeReady Mortgage

Pros:

Accessible to borrowers with credit scores starting around 620.
Flexibility in using household member income.
Down payment can come entirely from gift or grant funds.

Cons:

Income limits apply based on area median income.
Homebuyer education is required for many borrowers, which might add an extra step for some.

HomePossible Mortgage

Pros:

Flexible approach with non-occupant co-borrowers.
Comparable low down payment requirement with generous funding sources.
Homebuyer education is required only if all borrowers are new to homeownership.

Cons:

While credit guidelines generally start at 620, some lenders might impose higher requirements.
Income limits and documentation requirements apply, so individual circumstances may affect eligibility.

Which Program Is Right for You?

Your decision will depend on your personal financial situation and how you plan to qualify:

Choose HomeReady if you can benefit from including household member income or if you prefer Fannie Mae’s structure for low-to-moderate income borrowers.
Choose HomePossible if you want the option to add a non-occupant co-borrower and appreciate Freddie Mac’s flexible education requirement.

For tailored advice based on the most current guidelines, reach out to a knowledgeable mortgage professional.

Ready to Apply?

Start your homebuying journey by getting preapproved with New Way Mortgage. We’re here to guide you through every step of the process.

Talk or Text: 916-465-6639
Email: hello@newwaymortgage.com
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Frequently Asked Questions

Can these programs be used for investment properties?
No. Both HomeReady and HomePossible are designed for primary residences only.

What if my income slightly exceeds the limits?
In some high-cost areas, there is flexibility in income thresholds. Consult with your lender to see if you qualify.

Can I refinance with HomeReady or HomePossible?
Yes, both programs offer refinancing options for eligible borrowers.

How do closing costs compare?
Closing costs vary by location and lender. Assistance programs may be available to help manage these expenses.