Freddie Mac’s Home Possible Advantage or Fannie Mae’s HomeReady?
Freddie Mac’s Home Possible Advantage and Fannie Mae’s HomeReady are comparable programs for homeowners without significant down payments.
You can be a first-time home buyer for any program. When paired with a community second mortgage, both allow you to finance up to 105 percent of the cost of the property. With a first mortgage, both will enable you to borrow up to 97 percent of the property’s value.
They are different, though; you could choose one over the other.
The differences between the programs are described here, along with any implications for you.
Contribution of the Borrower
The borrower is required to provide this amount in their own money. For instance, your mortgage program could need a 10 percent down payment but enable you to borrow or receive a gift for half of it. You would then be required to provide a minimum borrower contribution of 5%.
For these two schemes, there are various borrower contribution criteria. These variations can matter if you wish to purchase a duplex, triplex, or four-plex.
Fannie Mae’s HomeReady program mandates a minimum borrower contribution of 3% of the purchase price when purchasing multifamily real estate. Freddie Mac has no minimum borrower contribution requirement for one- to four-unit homes.
Occupancy
Only primary properties may be purchased under these schemes; second homes or rentals are not permitted.
When the loan-to-value is 95% or less, the programs permit non-occupant co-borrowers.
Let’s say you’re assisting an elderly parent or adult kid in purchasing a property. Although you don’t want to live with your relative, you wish to be a co-borrower. Both programs permit this.
Household Earnings
There may be numerous people in a home who earn money that may be used to pay the mortgage. Typically, lenders consider the resident’s income and who is responsible for the loan.
Non-borrower income is viewed as a compensatory element by Fannie Mae. A candidate on the edge of approval could benefit from this and receive it.
Non-borrower income is not at all taken into account in Freddie Mac’s Home Possible Advantage.
But both systems take boarder income into account. You can thus include rent payments made by a roommate who has been paying your rent for at least a year as income.
Purchaser Education
There are academic prerequisites for both programs. This implies that borrowers must receive training or counseling from a recognized source.
If at least one borrower is not a first-time home buyer, you may skip the schooling using Freddie Mac’s Home Possible Advantage. You may obtain free online homeownership counseling from Freddie Mac or mortgage insurer MGIC if you require it or desire it.
For the HomeReady loan from Fannie Mae, at least one borrower must finish the educational program. Framework Homeownership, LLC is offering this course for $75.
What Are the Mortgage Rates Currently?
Rates on mortgages now fluctuate constantly. When searching for a mortgage with a modest down payment, it pays to research rates and costs from several lenders who offer both programs. The lender giving the best terms, interest rate, and service should be chosen.
