Key Takeaways
- HomeReady requires a 3% down payment and a 620+ credit score.
- Home Possible needs a 3% down payment and a 660+ credit score.
- Both offer reduced PMI, saving you money on insurance costs.
- HomeReady accepts non-resident co-borrower income, broadening qualification options.
Article Summary
Fannie Mae HomeReady and Freddie Mac Home Possible mortgages cater to a similar market segment, and both are popular among first-time home buyers. However, distinct features and requirements set them apart.
This guide to HomeReady vs Home Possible compares two popular conventional mortgages designed for low- to moderate-income home buyers.
The Differences Between Fannie Mae HomeReady and Freddie Mac Home Possible Mortgages
Fannie Mae HomeReady and Freddie Mac Home Possible mortgages cater to a similar market segment, and both are popular among first-time home buyers. However, distinct features and requirements set them apart.
Highlights: Fannie Mae HomeReady Mortgage
The HomeReady mortgage by Fannie Mae is tailored for low- to moderate-income borrowers. It stands out for low mortgage rates and reduced private mortgage insurance requirements.
Key features of the HomeReady mortgage include:
- A minimum down payment of 3 percent
- Income limits set at 80% of the area median income (check if you qualify with our income limits calculator)
- 620 minimum credit score
- Accepts co-borrower incomes, even if the co-borrower doesn't live in the home
- Available for various property types, including single-family homes, condos, and townhouses
Highlights: Freddie Mac Home Possible Mortgage
The Freddie Mac Home Possible mortgage offers affordable homeownership opportunities to a broad spectrum of borrowers, including first-time home buyers with lower credit scores.
Notable features of the Home Possible mortgage include:
- A minimum down payment of 3 percent
- Income limits at 80% of the area median income
- 620 minimum credit score
- Mandatory homeownership education for first-time home buyers
- Available for single-family homes, condos, and multi-unit properties
Both mortgages are affordable programs, catering to slightly different home buyer profiles.
Mortgages At-A-Glance
| Requirement | HomeReady | Home Possible |
|---|---|---|
| Minimum Loan Size Allowed | None | None |
| Maximum Loan Size Allowed | See Loan Limits | See Loan Limits |
| Maximum Household Income Allowed | 80% of AMI | 80% of AMI |
| Minimum Credit Score Required | 620 | 660 |
| Debt-to-Income Maximum - Standard | 50.00% | 50.00% |
| Debt-to-Income Maximum with Compensating Factors | 50.00% | 50.00% |
| Minimum Downpayment Required | 3.00% | 3.00% |
| Maximum Loan-To-Value Allowed | 97.00% | 97.00% |
| Maximum Combined Loan-to-Value Allowed | 105% | 105% |
| First-Time Homebuyer Education Required | Yes | Yes |
| Minimum Age Allowed | Minimum Legal Age | Minimum Legal Age |
| Maximum Age Allowed | None | None |
| First-Time Home Buyers Allowed | Yes | Yes |
| First-Time Home Buyers Only | No | No |
| Low-Down Payment Mortgage Classification | Yes | Yes |
| Income Verification Required | Yes | Yes |
| Military Service Required | No | No |
| States Allowed | All States | All States |
| Homeowners Insurance Required | Yes | Yes |
| Escrow Taxes & Insurance Required | Recommended | Recommended |
Compare Mortgage Statistics
| Requirement | HomeReady | Home Possible |
|---|---|---|
| Average Interest Rate: Last Year | Not Tracked | Not Tracked |
| Average Loan Size: Last Year | Not Tracked | Not Tracked |
| Average Approval Rate: Last Year | Not Tracked | Not Tracked |
| Market Share: Last Year | Not Tracked | Not Tracked |
| Purchase Mortgages Originated: Last Year | Not Tracked | Not Tracked |
Compare Mortgage Products
| Requirement | HomeReady | Home Possible |
|---|---|---|
| 1-Year ARM Available | No | No |
| 5-Year ARM Available | Yes | Yes |
| 10-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 15-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 20-Year Fixed-Rate Mortgage Available | Yes | Yes |
| 25-Year Fixed-Rate Mortgage Available | No | Yes |
| 30-Year Fixed-Rate Mortgage Available | Yes | Yes |
| Temporary Buydowns Available | Yes | Yes |
Compare Mortgage Insurance
| Requirement | HomeReady | Home Possible |
|---|---|---|
| Funding Fee / Guarantee Fee | No | No |
| Upfront Mortgage Insurance Premium | No | No |
| Annual Mortgage Insurance Premium | No | No |
| Private Mortgage Insurance | Yes | Yes |
Compare Occupancy Rules
| Requirement | HomeReady | Home Possible |
|---|---|---|
| Primary Residence | Yes | Yes |
| Second Home | No | No |
| Vacation Home | No | No |
| Investment Property | No | No |
| Non-Occupant Co-Borrower | Yes | Yes |
Compare Citizenship Rules
| Requirement | HomeReady | Home Possible |
|---|---|---|
| U.S. Citizen Allowed | Yes | Yes |
| Permanent Resident Alien Allowed | Yes | Yes |
| Non-Permanent Resident Alien Allowed | Yes | Yes |
| Foreign National Allowed | Yes | Yes |
| Buyers With Diplomatic Immunity Allowed | Yes | Yes |
Compare Credit Rules
| Requirement | HomeReady | Home Possible |
|---|---|---|
| Credit Scoring Model | Tri-merge | Tri-merge |
| Non-Traditional Credit References Allowed | Yes | Yes |
| Deferred Student Loans | Lesser of 5% of balance or monthly payment | Lesser of 5% of balance or monthly payment |
| Deferred Debt Calculation | Lesser of 5% of balance or monthly payment | Lesser of 5% of balance or monthly payment |
| Pay Off Medical Collections Prior To Closing | No | No |
| Pay Off Non-Medical Collections Prior To Closing | No | No |
| Bankruptcy, Chapter 7 | 4-year waiting period | 4-year waiting period |
| Bankruptcy, Chapter 13 | 4-year waiting period | 4-Year waiting period |
| Short Sale | 4-year waiting period | 4-year waiting period |
| Foreclosure | 7-year waiting period | 7-year waiting period |
| Judgments & Liens Allowed | Must be satisfied | Must be satisfied |
| Federal Income Tax Delinquency Allowed | Must be satisfied | Must be satisfied |
Compare Property Rules
| Requirement | HomeReady | Home Possible |
|---|---|---|
| Minimum Square Footage Allowed | No minimum | No minimum |
| Maximum Square Footage Allowed | No maximum | No maximum |
| Single-Family Residences Allowed | Yes | Yes |
| Condominiums Allowed | Yes | Yes |
| Non-Warrantable Condominiums Allowed | No | No |
| Co-ops Allowed | No | No |
| Townhomes Allowed | Yes | Yes |
| 2-4 Unit Homes Allowed | Yes | Yes |
| Manufactured Homes Allowed | Yes | Yes |
| Fraternity and Sorority Houses Allowed | No | No |
| Tiny Homes Allowed | Yes | No |
| Modular Homes Allowed | Yes | Yes |
| Cob Homes Allowed | Yes | No |
| Shipping Container Homes Allowed | Yes | Yes |
| Condotels Allowed | No | No |
| Bed & Breakfast Allowed | Yes | No |
| Working Farms Allowed | Yes | No |
| Working Ranches Allowed | Yes | No |
| Houseboats Allowed | No | No |
| Log Homes Allowed | Yes | No |
| Geodesic Homes Allowed | Yes | No |
| Timeshares Allowed | No | No |
| Homes with Solar Panels Allowed | Yes | Yes |
| 3-D Printed Homes Allowed | Yes | No |
| Leasehold Estates Allowed | Yes | Yes |
| Mixed-Use Properties Allowed | Yes | No |
| Flood Zones Allowed | Yes | Yes |
| Properties With More Than 20 Acres Allowed | Yes | No |
| Properties with PACE Allowed | Must be subordinated | No |
Compare Ownership Rules
| Requirement | HomeReady | Home Possible |
|---|---|---|
| Inter Vivos Revocable Trust Allowed | Yes | Yes |
| Closing in a Corporation Allowed | No | No |
| Community Land Trust Allowed | Yes | Yes |
| Non-Profit Organizations Allowed | No | No |
| Municipal Government Agencies Allowed | No | No |
Compare Income Rules
| Requirement | HomeReady | Home Possible |
|---|---|---|
| W-2 Income Allowed | Yes | Yes |
| Self-Employment Income Allowed | Yes | Yes |
| Investment Income Allowed | Yes | Yes |
| Retirement Income Allowed | Yes | Yes |
| Trust Income Allowed | Yes | Yes |
| Social Security Income Allowed | Yes | Yes |
| Military Income Allowed | Yes | Yes |
| Rental Income Allowed | Yes | Yes |
| Asset Depletion as Income Allowed | Yes | Yes |
| Offer Letter Income Allowed | Yes | Yes |
| Disability Income Allowed | Yes | Yes |
| Alimony and Child Support Income Allowed | Yes | Yes |
| Boarder Income Allowed | Yes | Yes |
| Accessory Dwelling Unit Income Allowed | Yes | No |
| Cannabis Industry Income Allowed | Yes | No |
| Automobile Allowance as Income Allowed | Yes | Yes |
| Housing Allowance as Income Allowed | Yes | Yes |
| Temporary Leave Income Allowed | Yes | Yes |
| Bank Statements as Income Allowed | No | Yes |
| Debts Paid By Others as Income Allowed | Yes | Yes |
Compare Assets & Downpayment Rules
| Requirement | HomeReady | Home Possible |
|---|---|---|
| Seasoning Requirements | 60 days | 60 days |
| Reserves Required | No | No |
| Cash Gift For Downpayment Allowed | No | No |
| Seller Concessions, Maximum | 3.00% | 3.00% |
| Salary Advance for Downpayment Allowed | No | No |
| Relocation Funds for Downpayment Allowed | Yes | Yes |
| Gift of Equity Allowed | Yes | Yes |
| Sweat Equity Allowed | Yes | Yes |
| Crypto for Downpayment Allowed | Yes | Yes |
| Cash Value For Credit Card Rewards Allowed | Yes | Yes |
| Cash Value For Airline Rewards Allowed | Yes | Yes |
Compare Loan Traits
| Requirement | HomeReady | Home Possible |
|---|---|---|
| Assumable Mortgage Allowed | No | No |
| Trailing Co-Borrower Allowed | Yes | Yes |
| Maximum Properties Financed Allowed | 2 | 2 |
| Flipped Homes Allowed | Yes | Yes |
| Arms-Length Transaction Required | No | No |
| Occupancy Deadline | 60 days | 60 days |
| Delayed Financing Allowed | Yes | Yes |
| Prepayment Penalty Allowed | No | No |
| Termite Inspection Required | No | No |
| Power of Attorney Allowed | Yes | yes |
| Repair Allowances Allowed | Yes | Yes |
| Gifts From Charitable Organizations Allowed | No | No |
Sources: FHFA
Important Notice For Home Buyers
This mortgage comparison information is based on published Federal Housing Finance Agency mortgage guidelines.
Mortgage guidelines for the HomeReady and Home Possible mortgage programs are subject to change without notice. Additionally, individual mortgage lenders may have their own variation of these guidelines, called lender overlays, which could affect your mortgage approval experience.
If a mortgage lender denies your HomeReady or Home Possible mortgage application, it does not necessarily mean all mortgage lenders will deny it. Different mortgage companies enforce different standards, and getting approved with another lender may be possible. Take the time to compare mortgage lenders to find one whose requirements match your profile.
Find Out More: HomeReady vs Home Possible Mortgages
Eager to learn more and make an informed decision? Dive into the details by visiting our comprehensive Fannie Mae HomeReady and Freddie Mac Home Possible guides. And when you're ready to move forward, compare lenders at Homebuyer.com.
