You want to buy a home, and you’re looking to get some assistance with your mortgage. You’ve probably heard of Fannie Mae and Freddie Mac, but odds are you don’t know the difference. And, frankly, it doesn’t really matter to you as a homebuyer. There’s only one real difference that’s relevant to borrowers, and that is the HomeReady and Home Possible programs.
The first is offered by Fannie Mae, and the second is offered by Freddie Mac. Both offer mortgage benefits to borrowers, and many of these benefits are the same. For example, both allow you to put down as little as 3% as a down payment (and both will finance up to 105% of the home’s value if you take out a second mortgage). Both also allow you to have co-borrowers that do not live at the home, if you are making a down payment of at least 5%.
That said, there are several notable differences between HomeReady and Home Possible, and one could be much better for your situation. Here are the three major differences between the two. If you need help determining which program is best for you, be sure to speak with a qualified lender.
1. Who’s Making Payments on The Loan?
It’s important to consider both your household income, and the income of whose name is going to be on the mortgage. For example, many married couples will probably be co-borrowers on their mortgage. Therefore, both of their incomes will be considered when applying for a mortgage.
Perhaps, however, one member of a married couple has had past credit issues, and so they will not be a co-borrower. This usually means that their income cannot be considered toward the mortgage application…unless you get a HomeReady mortgage. Home Possible does not allow non-borrowers to contribute their income toward the mortgage, even if they live in the home.
2. Education is Required
Both Home Possible and HomeReady require applicants undergo a homeowner’s education course in order to take advantage of their benefits. The ways these courses are undertaken differ.
Home Possible might be better for those who have already owned a home, because this program allows repeat buyers to skip the education step. If this is your first time buying a home, Home Possible might still be tempting because it offers its educational step online for free. HomeReady charges a $75 fee for its educational portion.
3. How Much Can You Put Down?
Neither HomeReady nor Home Possible requires much in terms of a down payment, but there is still a difference. Home Possible never requires a down payment, as long as you are not buying a property with more than four units. HomeReady is exactly the same, unless you’re buying a duplex or a property with multiple units. In this case, you’ll be required to put at least 3% down.
Business-minded people might look at these rules and reason that both HomeReady and Home Possible are still useful tools for getting started as a landlord. While this is true to some degree, it’s important to note that at least one borrower must be a permanent resident of the property in order to qualify for either HomeReady or Home Possible.
If you have further questions about HomeReady and Home Possible, be sure to speak with a qualified mortgage professional to learn if these programs can help you!