MyCommunityMortgage and FHA Mortgage Program Comparison
- The MyCommunityMortgage Program was replaced by the HomeReady Mortgage Program and is no longer available. We provide the information below for your reference. We recommend that you review our HomeReady Mortgage Guide and summary of No and Low Down Payment Mortgage Programs
The MyCommunityMortgage Program is similar to the FHA Mortgage Program, which is a government-backed program that 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
The MyCommunityMortgage Program and FHA Mortgage Program have several similarities, including the following:
- Focused on first-time home buyers with moderate incomes
- Allow people to buy homes with a low down payment (3.0% for the MyCommunityMortgage Program / 3.5% for the FHA Mortgage Program)
- Limits on mortgage amount
- Require borrowers to pay extra fees in addition to their mortgage payment (Private Mortgage Insurance (PMI) for the MyCommunityMortgage Program / FHA Mortgage Insurance Premium (MIP) for the FHA Mortgage Program)
There are also several differences between the MyCommunityMortgage Program and the FHA Mortgage Program, including the following:
- The interest rate for the MyCommunityMortgage Program is typically higher than the interest rate for the FHA Mortgage Program
- The FHA Mortgage Program requires the borrower to pay an up-front FHA Mortgage Insurance Premium (MIP) in addition to an ongoing monthly FHA MIP fee. The MyCommunityMortgage Program does not require an up-front fee but does require the borrower to pay an ongoing monthly Private Mortgage Insurance (PMI) fee
Although the interest rate on a MyCommunityMortgage loan is typically higher than the interest rate on an FHA mortgage, the FHA Program requires borrowers to pay an up-front and ongoing FHA Mortgage Insurance Premium (MIP) which is typically more expensive than the ongoing private mortgage insurance (PMI) that a borrower is required to pay with the MyCommunityMortgage Program
- The amount of the ongoing PMI and FHA MIP vary depending on the loan-to-value ratio, loan amount, mortgage program and borrower credit score
The example in the table below compares a MyCommunityMortgage with an FHA Mortgage
- The example uses a $200,000 fixed rate mortgage for both programs and looks at the total monthly cost to the borrower including the monthly mortgage payment and Private Mortgage Insurance (PMI) for the MyCommunityMortgage loan and the FHA Mortgage Insurance Premium (MIP) for the FHA loan
- The MyCommunityMortgage loan requires a lower down payment of 3.0% as compared to the 3.5% required down payment for the FHA Mortgage while the FHA Mortgage requires a lower minimum credit score of 580 as compared to the 620 required credit score typically for the MyCommunity Mortgage Program
- The FHA Mortgage requires the borrower to pay an up-front FHA MIP equal to 1.75% of the loan amount, although the borrower can add this cost to the mortgage amount
- In this example, despite having a larger mortgage amount with an FHA Mortgage due to the borrower including the up-front FHA MIP in the loan amount, the borrower saves $36 per month by choosing the FHA mortgage because the interest rate on an FHA loan is typically lower than the interest rate on a MyCommunityMortgage
- Your individual situation will vary depending on interest rates, mortgage amount, down payment, PMI rate and your mortgage goals and it is best to understand and compare both programs
- We recommend that you use the MORTGAGE RATES feature to contact multiple lenders that offer both the FannieMae MyCommunityMortgage Program and the FHA Mortgage Program to understand their pros, cons and costs so you can select the program that is right for you
Sources
"Buying a Home." Federal Housing Administration. U.S. Department of Housing and Urban Development, 2020. Web.
"Mortgage Products." Originating & Underwriting. Fannie Mae, 2019. Web.
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