Homeready VS FHA

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These two loan options go head to head for the home buyers who typically have less than 10-20% for a down payment. Both options offer an affordable path to home ownership, and both exist because they fit different applicant criteria.
This is a lot of information and can be overwhelming at first! When you’re ready, I can work through both with you and start a strategy for your personal situation and plans.

The Basics:
  • A low down payment minimum is required for each.
  • Mortgage insurance is set up differently but it is required with both (if you’re putting less than 20% down).
  • It is not required that you be a first-time home buyer for either.
  • Each has a minimum credit score requirement which also depends on the lender you work with.
  • Both programs require you to occupy the house you purchase using the loan.
Key Differences:
  • Mortgage Insurance: FHA is fixed at one rate, no matter what your credit score is, as long as you qualify. FHA mortgage insurance lasts for the entirety of the loan term, with some exceptions. With Homeready, mortgage insurance is variable depending on your loan amount and credit score, but the monthly insurance payment will be removed after you own 22% of your home.
  • Homeready has income limits, FHA has loan amount limits.
  • Both options typically require a minimum credit score of 620.
  •  FHA loans have lower interest rates because they are partially insured; Homeready loan’s interest rates depend heavily on credit score and LTV (loan-to-value). Mortgage Glossary

FHA:

  • 3.5% minimum down payment
  • Fixed monthly mortgage insurance. If you put down 5% or more (on a 30-year loan), the fixed rate is decreased slightly.
    • Mortgage Insurance will last for the entire life of the loan, not simply until you pay off a certain percentage of your loan. This is one major difference with an FHA loan.
  • UFMIP: 1.75% Up Front Mortgage Insurance Premium. To help support the insurance of your loan by the FHA (Federal Housing Administration), they collect monthly mortgage insurance, as well as a onetime fee of 1.75%, which can be paid upfront, or added to your loan amount.
  • FHA loans are partly insured, therefore lenders can offer lower interest rates which lowers monthly payments.
Qualifications:
  • Maximum Loan Amount: $294,515 for 1 unit (single family residnce) in Spokane County. Limits vary by county, and unit count (1 unit/ 2 unit - duplex, triplex...) – to find a county’s limit, look it up here
  • Minimum credit score: 620
  • To purchase a home with an FHA loan, the house must be your primary residence. You can only purchase investment properties with FHA if you purchase a duplex/triplex and live in one of the units.

Homeready:

  • 3% minimum down payment
  • Mortgage insurance will depend on your loan amount, but more importantly, your credit score.
    • Example:
      • $200,000 loan amount in Washington State
      • 3% down payment
§     Credit score
Monthly Mortgage Insurance Rate
§     620
§     $301.67
§     640
§     $278.33
§     660
§     $253.33
§     680
§     191.67
§     700
§     $155
§     720
§     $128.33
§     740
§     $105
§     760 +
§     $73.33
    • Once you payoff 22% of your home, the monthly mortgage insurance payment will no longer be required, and will be taken off your monthly mortgage total payment.
Qualifications:
  • Income Limits exist depending on the purchasing property location. This means you cannot earn more than the yearly limit to use the Homeready loan for that property purchase. In Spokane, the household income limit is $65,700 where limits do exist. Search this map to see what areas have the income limit restriction, and to find what limits exist elsewhere.
  • Minimum credit score: 620.
  • Must be your primary residence if you are purchasing a house with a Homeready loan.
  • An approved home ownership course is required to be taken by at least one borrower. This Framework course can be taken online.
  • Max loan amount of $453,100 
Maverick Johnston 
509-230-0768
NMLS ID #1668965


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