WHAT ARE HOME POSSIBLE & HOMEREADY LOANS?
Home Possible and HomeReady loans, sponsored by 1st Advantage Mortgage, are government-sponsored enterprises (GSEs). GSEs are privately held agencies established by Congress to enhance credit flow.
Instead of backing their own loans, GSEs purchase mortgages from lenders, holding them in portfolios or selling them through mortgage-backed securities. This stabilizes and makes the national mortgage market more affordable.
Home Possible and HomeReady cater to potential buyers with lower incomes and credit scores, enabling them to purchase a home without a 20% down payment or a credit score of 740 or above.
HOME POSSIBLE LOANS
Home Possible, backed by the Federal Home Loan Mortgage Corporation (Freddie Mac), targets low-to-moderate-income homebuyers, requiring just a 3% down payment—significantly lower than conventional mortgages. The program accommodates credit scores of 660 or above, and those without a credit history may qualify with a 5% down payment. Private mortgage insurance (PMI) is required until the loan balance reaches 80% or less of the home’s value.
Home Possible is suitable for buyers who can’t save a large down payment, make 80% or less of the local area median income, have a credit score of 660 or higher, and are either first-time buyers or experienced homeowners.
HOMEREADY LOANS
HomeReady, another GSE-backed program, is designed for homebuyers with lower incomes, requiring a minimum 3% down payment. Its differentiator is the even more flexible credit score requirement of 620 or higher. Similar to Home Possible, PMI is required until the loan balance reaches 80% or less of the home’s value.
HomeReady is ideal for buyers unable to save a large down payment, making 80% or less of the local area median income, having a credit score of 620 or higher, and being either first-time buyers or experienced homeowners.
BENEFITS OF HOMEREADY AND HOME POSSIBLE LOANS
- Low down payment
- Lower credit score requirements
- PMI cancellation once the loan balance reaches 80% or less of the home value
- Acceptance of monetary gifts for the down payment
- Applicability to refinancing
- Open to both experienced and new homeowners
- Accessible to low-to-moderate-income buyers
REQUIREMENTS FOR HOMEREADY AND HOME POSSIBLE LOANS IN NC & SC
These loans have different requirements compared to conventional loans:
- Income Limitations: Buyers must not exceed 80% of the area median income (AMI) for their location.
- Down Payment: A minimum of 3% of the home’s cost is required, and the source of the down payment is flexible.
- Homeownership Education Course: Mandatory for first-time buyers or those without a credit score.
PROS & CONS OF HOMEREADY AND HOME POSSIBLE LOANS
Pros:
- Accessible to low-to-moderate income buyers
- Lower credit score requirements
- Use of gifts or grants for down payment
- No first-time homeowner requirement
- Available for refinancing
Cons:
- Not accessible to homebuyers with income higher than 80% AMI
- Requires private mortgage insurance
- No ownership of other residences in the US
- Higher interest rates
HOW TO APPLY FOR A HOMEREADY OR HOME POSSIBLE LOAN
To apply:
- Consider Options: Research and choose the right loan for your situation.
- Recruit a Lender: Work with a lender like 1st Advantage Mortgage.
- Apply: Submit your application, along with income verification documents. If approved, set your interest rate and loan amount.
WORK WITH 1ST ADVANTAGE MORTGAGE TO SECURE A HOMEREADY OR HOME POSSIBLE LOAN
1st Advantage Mortgage provides personalized assistance through Mortgage Coaches, ensuring an efficient and easy process. Use technology for a quick experience and benefit from the 1st Advantage Mortgage Closing Guarantee.
HOMEREADY AND HOME POSSIBLE FAQS
1st Advantage Mortgage is here to answer your questions:
- Difference Between HomeReady and Home Possible: HomeReady is slightly more flexible, with a lower credit score requirement (620).
- First-Time Homebuyer Requirement: Not necessary, but completion of a homeownership education course is required.
- Down Payment: Both loans require a minimum of 3% of the home’s cost.
- Home Eligibility: Designed for single-family, single-unit homes, and can be used for two- to four-unit homes with the primary residence in one unit.
