»
HomeReady Mortgage and FHA Mortgage Program Comparison
Prior Page
HomeReady Mortgage Guide
Prior
Page
Home Possible Mortgage Guide
Next
Page
Next Page

HomeReady Mortgage and FHA Mortgage Program Comparison

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

The HomeReady and FHA mortgage programs are both designed to help borrowers buy homes with low down payments.  In many cases a potential home buyer may be deciding between the HomeReady Program or the FHA Program so it is helpful to compare the programs so that borrowers can select the program that best meets their personal objectives and financial priorities.  Below, we summarize the programs, outline their similarities and differences and provide a detailed example that enables borrowers to compare the programs side-by-side.

Summary of HomeReady and FHA Mortgage Programs

HomeReady Mortgage Program: Offered by Fannie Mae through participating lenders, the HomeReady Program enables individuals with limited income and funds to buy a home with a down payment as low as 3.0% of the property purchase price and no minimum borrower contribution.  The HomeReady Program also allows lenders to consider non-traditional sources of income from non-occupant borrowers (parents), non-borrower household members (relatives) and boarders which improves a borrower’s ability to qualify for the mortgage or enables the borrower to qualify for a higher mortgage amount.

FHA Mortgage Program: Backed by the government and offered by participating lenders, the FHA Mortgage Program enables low-income individuals and individuals with limited funds to obtain mortgages and purchase homes with a down payment as low as 3.5% of the property purchase price.

Similarities Between the HomeReady and FHA Programs

The HomeReady Mortgage Program and FHA Mortgage Program have several similarities, including the following:

Both programs are offered by traditional mortgage lenders such as banks, mortgage banks, mortgage brokers and credit unions, although not all lenders offer the programs.  We recommend that you shop multiple lenders and compare HomeReady and FHA loan terms to select the program that best meets your needs.  Shopping for your mortgage is the best way to find the loan and lender that are right for you. 

%
Current FHA Mortgage Rates in Ashburn, Virginia as of March 5, 2021
  • Lender
  • APR
  • Loan Type
  • Rate
  • Payment
  • Fees
  • Contact
View All Lenders

%

Differences Between the HomeReady and FHA Programs

There are several differences between the HomeReady and the FHA programs, including the following:

Use the FREEandCLEAR Lender Directory to find top-rated lenders in your state that offer HomeReady and FHA mortgages and many other low down payment programs.

MORTGAGE LENDER DIRECTORY
MORTGAGE LENDER DIRECTORY
3,900+ LENDERS ● 25 LOAN PROGRAMS ● RATINGS & REVIEWS
$ FIND LENDERS NOW

HomeReady Mortgage and FHA Mortgage Program Example Comparison

The example in the table below compares a HomeReady Mortgage with an FHA Mortgage.  The example uses a $200,000 fixed rate loan for both programs and looks at the total monthly cost to the borrower including the monthly payment plus private mortgage insurance for the HomeReady loan and FHA mortgage insurance premium for the FHA loan.  The FHA Mortgage also requires the borrower to pay an up-front FHA MIP fee equal to 1.75% of the loan amount, although the borrower can add this cost to the loan.

The HomeReady mortgage requires a lower down payment of 3.0% as compared to the 3.5% required down payment for the FHA Mortgage. For the purpose of this example, to calculate the required ongoing PMI and FHA MIP fees we use a credit score of 690, which is above the minimum credit score required for both programs: 580 for FHA (if you make a 3.5% down payment) and ~620 for HomeReady.

It is important to highlight that in order to qualify for the HomeReady 3% down payment program option, borrowers typically are required to have a minimum credit score of 680 - 700, depending on their debt-to-income ratio. Borrowers with a minimum credit scores of 620, and possibly lower, can qualify for the HomeReady program but are required to make higher down payments.

In this example, despite the larger FHA mortgage due to including the up-front FHA MIP in the loan amount, the borrower saves $95 per month by choosing the FHA loan because the mortgage rate is lower than the rate on the HomeReady loan, which is typically the case.  The example is illustrative and your individual situation will vary based on mortgage rates, loan amount, down payment, credit score and your financial goals.

When comparing HomeReady and FHA loans always keep in mind your total cost including both your mortgage rate and mortgage insurance but remember that HomeReady mortgage insurance is cancelable as you pay down your loan while FHA mortgage insurance is not. Review the comparison table below to understand the program that works best for you.

FHA Mortgage
Fannie Mae HomeReady Mortgage
Credit Score
690
690
Minimum Down Payment
3.5%
3.0%
Loan Amount
$200,000
$200,000
Mortgage Term
30 Years
30 Years
Interest Rate
3.750%
4.250%
Up-Front Mortgage Insurance Premium (MIP) (%)
1.75%
Not Required
Up-Front Mortgage Insurance Premium (MIP) ($)
$3,500
Not Required
Total Loan Amount ($)
$203,500
$200,000
Ongoing Monthly Mortgage Insurance Rate (%)
.85%
1.21%
Ongoing Monthly Mortgage Insurance ($)
$144
$202
Monthly Mortgage Payment (Principal & Interest)
$942
$989
Total Monthly Payment (Principal, Interest & Mortgage Insurance)
$1,086
$1,191
Difference
$105

Use our free personalized mortgage quote form to review loan proposals from leading lenders.  Our quote form is easy-to-use, requires minimal information and does not impact your credit.  Comparing multiple quotes is the best way to save money on your mortgage.

PERSONALIZED MORTGAGE QUOTE
$
LEADING LENDERS ● LOW RATES ● FREE

Related FREEandCLEAR Resources


Sources

"HomeReady Mortgage."  Mortgage Products.  Fannie Mae, 2020.  Web.

"Let FHA Loans Help You Buy a Home."  Federal Housing Administration.  U.S. Department of Housing and Urban Development, 2020.  Web.

About the author
Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

Harry Jensen LinkedInLinkedIn | Email Harry JensenEmail
X
OPEN